- Crypto Firms Struggle – Anti-crypto banking policies remain unchanged despite Trump’s return, says Custodia Bank CEO Caitlin Long.
- FDIC Resistance – Custodia Bank CEO criticizes FDIC’s outdated approach, blaming years of resistance under former Chair Martin Gruenberg.
- Stablecoin Risks – Long warns U.S. banks hold just 8% cash reserves, urging stricter stablecoin rules to prevent liquidity crises.
Custodia Bank CEO Caitlin Long argues that crypto firms face banking challenges due to anti-crypto directives, FDIC resistance, and stablecoin regulations. She warns that without mandatory cash reserves, banks remain vulnerable to liquidity crises, similar to Silvergate Bank’s collapse.
Trump Administration and Crypto Debanking Concerns
Despite the Trump administration having been more supportive of cryptocurrency than the previous one, it still has not tackled the problem of crypto debanking, stated Custodia Bank CEO Caitlin Long. The CEO of Custodia Bank, Caitlin Long, stated that the US government has done “nothing” to tackle crypto debanking problems since Donald Trump’s return to the White House.
Addressing the audience at ETHDenver on February 28, Long stated that although the “perception is that there has been a softening, none of the federal banking agencies have really changed any of the anti-crypto directives.”
“It is still considered unsafe and unsound for a bank to handle a digital asset, even in minimal quantities,” Long stated while contending that “nothing” has altered. “That will undoubtedly change, but Trump hasn’t suggested anything so far.”
FDIC Leadership and Resistance to Crypto Banking
The CEO of the crypto-friendly bank stated that the White House must designate a new chair to head the Federal Deposit Insurance Corporation, which Long noted has mainly resisted adapting to technological advancements for nearly 15 years under Martin Gruenberg’s direction.
“This explains why the banking system in this country is so outdated, as for the past 15 years, we’ve had a person uninterested in making any changes.”
Gruenberg, who was succeeded by Acting Chair Travis Hill on January 20, faced allegations of being a primary architect of “Operation Chokepoint 2.0” — an alleged federal initiative to cut off banking services to crypto firms.
Long recognized that the Securities and Exchange Commission has made a “massive 180” regarding its crypto policy — and is anticipating a similar change in banking regulation.
Stablecoin Legislation and Consumer Protection
The day following the inauguration of US President Donald Trump on January 20, the SEC formed a Crypto Task Force headed by SEC commissioner Hester Peirce to back this new strategy.
The SEC notably revoked a contentious regulation, Staff Accounting Bulletin 121, which required financial companies with crypto holdings to list them as liabilities on their balance sheets.
Long also expresses hope that the US will soon enact the long-anticipated stablecoin legislation, but emphasizes the need for stronger consumer protections, particularly ensuring that banks retain cash reserves.
“Currently, the typical bank in the United States keeps 8 cents in cash for every $1 of demand deposits… This situation is inherently unstable and highly vulnerable to a bank run.” “And in the cryptocurrency sector, I believe we’ve realized that this business model is ineffective,” Long stated, referencing the collapse of Silvergate Bank.
In order to properly safeguard consumers, stablecoin issuers should be required to maintain cash reserves to support the stablecoin obligation, Long stated.
