Cryptocurrency exchange Coinbase has sued the U.S. Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC) for not complying with Freedom of Information Act (FOIA) requests. Coinbase claims federal financial regulators are undermining the cryptocurrency sector by severing banking ties.
FOIA Requests and Coinbase’s Allegations
Coinbase, through consulting firm History Associates, filed FOIA requests to access information from federal financial regulators. The complaints target the SEC, FDIC, and Fed, alleging they use regulatory tools to destabilize the cryptocurrency space. The lawsuit aims to highlight the FDIC’s role by emphasizing the need for transparency and accountability in federal agencies’ actions.
Specifically, Coinbase’s FOIA requests to the SEC sought information about the agency’s stance on Ethereum (ETH). This follows a March 2023 lawsuit by Blockchain software firm Consensys against the SEC for investigating “Ethereum 2.0”.
SEC completed its investigation but denied record requests related to Ethereum’s transition to a Proof of Stake consensus mechanism. Additionally, Coinbase criticized the SEC for withholding documents on closed investigations involving Zachary Coburn and Enigma MPC, arguing it hinders understanding the legal basis for enforcement actions in the cryptocurrency space.
FDIC’s Letters
In its lawsuit against the FDIC, Coinbase pointed to FOIA requests regarding letters issued between March 2022 and May 2023. These letters instructed financial institutions to halt expanding crypto-related activities and provide more information.
A report from the FDIC’s Office of Inspector General highlighted potential risks and uncertainties due to the lack of a review timeframe for these letters. Coinbase argued these letters are part of Operation Choke Point 2.0, an effort to block cryptocurrency firms from accessing essential banking services. The FDIC rejected the FOIA requests, citing the need to protect sensitive information about the banks involved.
Ongoing Legal Battles and Regulatory Pressures
This move is not Coinbase’s first clash with regulators. In April 2023, Coinbase sued the SEC for not responding to a rulemaking petition it had filed since July 2022.
Although the SEC proposed rules affecting crypto, it has not issued regulations specific to the cryptocurrency space. The SEC has also continued enforcement actions against various cryptocurrency platforms and projects. Last year, the SEC sued Coinbase for operating its platform without registration. The crypto industry criticizes the SEC’s “regulation by enforcement” approach, while SEC Chairman Gary Gensler argues most cryptocurrencies are securities and should be regulated accordingly.
