The Federal Deposit Insurance Corporation (FDIC) has agreed to a settlement in a Freedom of Information Act (FOIA) lawsuit, conceding its legal fight over the controversial ‘Pause Letters’ sent to banks engaged in digital asset activities. As part of the agreement, the federal agency is obligated to pay the plaintiff’s legal fees and drop its resistance to the disclosure of internal documents related to these regulatory directives.
The FOIA lawsuit, filed by transparency advocates seeking insight into the FDIC’s regulatory process, centered on internal communications, memos, and policy decisions surrounding the issuance of the ‘Pause Letters.’ These letters, which began circulating in 2022, were sent to regulated entities involved with cryptocurrency, effectively instructing them to cease or significantly slow down certain crypto-related initiatives, often citing safety and soundness concerns.
Critics of the FDIC argued that the letters constituted ‘regulation by enforcement’ or ‘shadow regulation,’ bypassing the standard public notice and rulemaking procedures required for formal guidance. The FDIC had initially resisted the FOIA requests, claiming exemptions to protect internal deliberations.
By settling the case and agreeing to pay a specified amount in attorneys’ fees, the FDIC avoids a potentially protracted court battle and paves the way for the public release of key documents. This outcome is widely viewed as a significant victory for regulatory transparency in the financial technology and digital asset sectors. The disclosed materials are expected to shed light on how the agency formulated its cautious stance on crypto banking and its rationale for using non-public directives to manage perceived systemic risks associated with decentralized finance.
Source: FDIC Agrees to Pay Fees, Drop FOIA Fight Over Crypto ‘Pause Letters’
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