- Despite perceived loosening under Trump’s administration, Custodia Bank CEO Caitlin Long claims no actual banking policy changes for crypto have occurred.
- Long criticizes the banking system’s resistance to technological change, citing 15 years of stagnation under former FDIC Chair Martin Gruenberg.
- While the SEC has pivoted its crypto approach, Long advocates for stronger stablecoin regulations requiring issuers to maintain full cash reserves.
No substantial changes to crypto banking regulations have materialized since President Trump returned to the White House, according to Caitlin Long, CEO of Custodia Bank. Speaking at ETHDenver on February 28, Long challenged the narrative that regulatory conditions have improved for cryptocurrency companies seeking banking relationships.
“The perception is that there has been a loosening, none of the federal banking agencies have actually overturned any of the anti-crypto guidance,” Long said during her presentation. She emphasized that banking regulators still consider digital asset involvement “unsafe and unsound” for financial institutions, even in minimal amounts.
While acknowledging that policy shifts are likely forthcoming, Long noted, “That is going to change, no doubt, but Trump hasn’t proposed [anything] yet.”
The crypto-friendly banking executive identified leadership changes at the Federal Deposit Insurance Corporation (FDIC) as crucial for regulatory evolution. Long specifically criticized former FDIC Chair Martin Gruenberg, who was replaced by Acting Chair Travis Hill on January 20, suggesting Gruenberg’s resistance to technological innovation had severely hindered the banking sector.
“This is why the banking system is so backwards in this country, because for the last 15 years, we’ve had somebody who isn’t interested in any change,” Long stated.
Industry observers had previously identified Gruenberg as a key figure in what some termed “Operation Chokepoint 2.0,” an alleged coordinated effort by federal agencies to restrict banking services for cryptocurrency companies.
Long did acknowledge positive developments at the Securities and Exchange Commission (SEC), which has executed what she described as a “massive 180” in its crypto approach since Trump’s inauguration. On January 21, the SEC established a Crypto Task Force led by Commissioner Hester Peirce and rescinded Staff Accounting Bulletin 121, a controversial rule that required financial institutions to record crypto holdings as liabilities.
Regarding stablecoin legislation, Long expressed support for stronger consumer protections, particularly requirements for cash reserves. She highlighted systemic vulnerabilities in the current banking model:
“The average bank in the United States right now holds 8 cents in cash against every $1 of demand deposits… That’s fundamentally unstable and fundamentally susceptible to a bank run.”
Drawing lessons from past industry failures like Silvergate Bank, Long advocated for mandating stablecoin issuers to maintain full cash reserves matching their outstanding tokens. “In the crypto industry, I think we’ve learned that that business model does not work,” she concluded.
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