WASHINGTON, Jan 3 (Reuters) -

A U.S. bank regulator told banks to pause dabbling directly

in crypto in 2022 and 2023, but did not order them to stop

providing banking services to crypto companies contrary to

industry complaints of widespread "debanking," according to

documents released on Friday.

A judge ordered the Federal Deposit Insurance Corporation to

provide versions of supervisory "pause letters" it sent to

unidentified banks after History Associates Incorporated, a

research firm hired by crypto exchange Coinbase, sued

the agency to release them.

The FDIC first released the letters in December but was

ordered by the judge to resubmit them with more "nuanced

redactions." The new batch of 25 letters includes two additional

letters sent to unidentified banks that were not included in the

original FDIC submission.

The litigation is part of a campaign by Coinbase to expose

what it and other crypto companies say has been a concerted

effort on the part of U.S. bank supervisors to choke off crypto

companies from the traditional financial system.

Coinbase's chief legal officer, Paul Grewel, said in a post

on X Friday that the less redacted letters show a "coordinated

effort to stop a wide variety of crypto activity" and called for

further investigation by Congress.

In a bid to combat those claims, the FDIC also on Friday

published a 2022 internal memo detailing how supervisors should

assess queries from lenders looking to directly deal in crypto

assets, versus offering banking services to crypto companies.

Together, the documents provide a rare glimpse into the

confidential bank supervisory process. They suggest that while

FDIC examiners have been cautious towards the crypto sector,

which has been beset by scams, bankruptcies and volatility, they

did not order banks to entirely cut off the crypto sector.

The documents are being released weeks before

President-elect Donald Trump's incoming administration is

expected to outline a broad crypto policy overhaul. Trump is

expected to issue an executive order directing bank regulators

to go easier on the sector, potentially as early as his Jan. 20

inauguration.

Several of the FDIC letters show staff directed banks to

either pause entering crypto initiatives or refrain from further

expanding client crypto services. In others, the FDIC required

banks to answer detailed questions before proceeding further

with crypto ventures.

The internal memo, meanwhile, distinguishes between a bank

engaging directly in crypto activities, like holding crypto

assets in custody, and offering traditional banking services for

crypto clients, like lending and providing deposit accounts. The

first category requires stricter scrutiny, it says.

The memo echoes comments made in December by FDIC Chairman

Martin Gruenberg, who told reporters the agency does not

"debank" crypto firms in terms of access to bank accounts, but

direct crypto engagement by banks is a "subject of supervisory

attention."

"Crypto-related activities may pose significant safety and

soundness and consumer protection risks, as well as financial

stability concerns," the memo notes, adding such risks are still

"evolving."