By Pete Schroeder and Douglas Gillison

WASHINGTON (Reuters) – A U.S. bank regulator advised banks to pause direct involvement in crypto in 2022 and 2023 but did not mandate halting banking services to crypto firms.

Documents released on Friday showed that a judge ordered the Federal Deposit Insurance Corporation (FDIC) to reveal supervisory “pause letters” sent to unnamed banks after History Associates Incorporated, a research firm hired by crypto exchange Coinbase (NASDAQ:COIN), sued the FDIC to make them public.

The FDIC initially released these letters in December but was instructed by the judge to refile them with more detailed redactions. This latest batch includes 25 letters, two of which were not in the original submission.

This litigation is part of Coinbase’s efforts to highlight what it claims is a systematic attempt by U.S. bank regulators to isolate crypto firms from the traditional banking infrastructure.

Coinbase’s Chief Legal Officer, Paul Grewel, stated on social media that the newly unveiled letters indicate a “coordinated effort to stop a wide variety of crypto activity,” urging Congress to further investigate.

To counter these assertions, the FDIC published a 2022 internal memo outlining how supervisors should manage inquiries from lenders considering direct engagement in crypto assets versus providing traditional banking services to crypto clients.

The newly released documents provide insight into the confidential bank supervisory process. They imply that while FDIC examiners have approached the crypto sector with caution—due to scams, bankruptcies, and volatility—they have not ordered banks to sever ties with the sector.

These documents come just weeks before President-elect Donald Trump is expected to announce a significant overhaul of crypto policy, possibly issuing an executive order for regulators to ease restrictions on the sector as early as January 20.

Several FDIC letters instruct banks to pause their crypto initiatives or restrict the expansion of services related to crypto clients. Others require banks to answer detailed questions before proceeding with any crypto ventures.

The internal memo clarifies the distinction between a bank participating directly in crypto activities, like custody of crypto assets, and providing standard banking services to crypto clients, such as lending and deposit accounts. Direct crypto engagement necessitates stricter scrutiny.

FDIC Chairman Martin Gruenberg previously stated that the agency does not “debank” crypto firms in terms of access to bank accounts. However, direct involvement in crypto by banks is viewed as “subject to supervisory attention.”

The memo warns that crypto-related activities present significant risks to safety, soundness, consumer protection, and financial stability, and acknowledges that these risks are still “evolving.”