Custodia Bank CEO Caitlin Long has voiced strong criticism over the U.S. government’s continued inaction on crypto debanking, despite former President Donald Trump returning to office. Speaking at ETHDenver on February 28, Long argued that federal banking agencies have not reversed any anti-crypto policies, contradicting expectations of a regulatory shift.
Lack of Policy Change in Crypto Banking
Long emphasized that U.S. regulators still deem crypto-related banking activities as unsafe and unsound, with no substantial policy reversals on the horizon. “It is still presumed unsafe and unsound for a bank to touch a digital asset even in a de minimis amount,” she stated, highlighting the stagnation in crypto banking regulations. While she remains hopeful that change will eventually come, Long noted that the Trump administration has yet to introduce any concrete reforms in this area.
Call for Leadership Change at the FDIC
A key point in Long’s criticism was the leadership of the Federal Deposit Insurance Corporation (FDIC). She argued that former FDIC chairman Martin Gruenberg had stifled technological progress for over 15 years, making the banking system resistant to innovation.
“This is why the banking system is so backwards in this country,” Long stated, calling for deeper structural changes beyond the appointment of Acting Chair Travis Hill, who replaced Gruenberg on January 20.
Long also referenced accusations that Gruenberg played a significant role in ‘Operation Chokepoint 2.0,’ a controversial alleged federal effort to deny banking access to crypto businesses.
Signs of a Regulatory Shift?
While Long criticized banking regulators for their rigidity, she acknowledged a recent shift in the U.S. Securities and Exchange Commission’s (SEC) approach toward the crypto industry. Notably, the SEC established a Crypto Task Force under Commissioner Hester Peirce just one day after Trump’s inauguration, signaling a potential change in the agency’s stance on digital assets.
Additionally, the SEC revoked Staff Accounting Bulletin 121 (SAB 121), a widely criticized rule that forced financial institutions to classify crypto holdings as liabilities. This reversal was welcomed by industry leaders as a step toward fairer treatment of crypto-related financial services.
Stablecoin Regulation and Financial Stability
Long also urged lawmakers to advance stablecoin regulations, warning that U.S. banks’ reliance on fractional reserves poses a systemic risk. She highlighted that many banks hold just 8 cents in cash for every $1 of demand deposits, making them vulnerable to bank runs—an issue previously seen in the collapse of Silvergate Bank.
To prevent similar crises in the crypto space, Long advocated for stablecoin issuers to maintain full cash reserves to back their liabilities. “In the crypto industry, we’ve learned that business model does not work,” she said, emphasizing the need for stricter consumer protections and financial stability in the sector.
Political Shifts and the Future of Crypto Regulation
The shifting political landscape has already influenced regulatory actions. Throughout February, the SEC dropped multiple enforcement cases against crypto firms, indicating a softer stance under the Trump administration. Reports suggest that cryptocurrency enforcement may ease further, with regulatory priorities expected to shift toward immigration enforcement—a key campaign promise of Trump’s administration.
At a legal conference in New York, senior government officials and former regulators suggested that while financial fraud cases will still be pursued, crypto-related enforcement may no longer be a top priority.
As the regulatory landscape continues to evolve, the crypto industry awaits clearer policy direction from the Trump administration, particularly in areas such as banking access and stablecoin oversight.
