The U.S. FDIC does not encourage member banks to use public blockchains such as Ethereum

PANews reported on January 4 that according to Decrypt, according to unredacted documents obtained by Coinbase, Bank of America tried to provide customers with services based on public blockchain networks, but seemed to be dissuaded by the Federal Deposit Insurance Corporation. The disclosure stems from a large number of unredacted encryption-related communications between the FDIC and member banks. Coinbase, a San Francisco-based cryptocurrency exchange, obtained these documents through the Freedom of Information Act (FOIA). Last month, Coinbase obtained heavily redacted versions of 23 such letters. Due to a court order, the contents of these letters (and two new letters) were (almost) fully disclosed today.

One of the letters, sent from the FDIC’s New York office to a member bank in March 2022, details how the federal agency learned of the bank’s plans to launch a “bank digital deposit” program that would run on a public blockchain. The name of the public blockchain remains undisclosed. In the letter, the FDIC appeared to express displeasure with the bank’s choice to use a public blockchain instead of a private permissioned network. Blockchains like Ethereum and Solana are decentralized and permissionless, meaning activity on them is completely public and cannot be overwritten by third-party human administrators. In contrast, private blockchain networks, like those used by nation-states to issue central bank digital currencies, place restrictions on who can use them and for what purposes.

The FDIC is clearly not in favor of member banks launching products on a universal, fully transparent network. In a March 2022 letter, the regulator instructed New York banks to undergo a new detailed review process before launching any products on a public blockchain. Other letters disclosed show that the FDIC ordered member banks to stop implementing services related to the buying and selling of Bitcoin. Part of the same letter that was not redacted last month shows that the FDIC instructed member banks to "suspend all activities related to crypto assets."