Crypto Banking Stalemate Persists, Warns Caitlin Long

The cryptocurrency banking sector faces continued regulatory resistance as federal agencies maintain strict oversight of digital asset operations, according to Custodia Bank CEO Caitlin Long.

Following FTX’s collapse, multiple crypto founders report systematic debanking through FDIC Pause Letters and denied services, with Coinbase’s Chief Legal Officer documenting 23 such cases. Marc Andreessen characterizes the situation as “operation choke point 2.0,” while industry experts point to deeper regulatory challenges that demand thorough reform.

Highlights

• Caitlin Long highlights ongoing regulatory resistance preventing cryptocurrency firms from accessing traditional banking services.
• Federal banking agencies maintain restrictive policies, issuing Pause Letters forcing banks to cease crypto operations.
• Post-FTX collapse, regulatory hostility has intensified, leading to widespread debanking of cryptocurrency businesses.
• Twenty-three documented Pause Letters demonstrate systematic efforts by regulators to limit crypto-related banking activities.
• Current banking regulations lack adequate consumer protection and stablecoin oversight, perpetuating the crypto banking stalemate.

Despite former President Trump’s pro-crypto stance, federal banking agencies have maintained their restrictive posture toward cryptocurrency activities, creating a persistent stalemate in the digital asset banking sector.

The regulatory environment continues to pose challenges, with FDIC-supervised banks receiving Pause Letters directing them to cease crypto operations, while the Federal Reserve’s rejection of Custodia Bank’s master account application signals ongoing resistance to crypto banking reforms.

Caitlin Long, a prominent figure in the crypto banking sphere, has expressed concern over the administration’s failure to address crypto debanking issues. “The response to FTX’s collapse has led to an increasingly hostile regulatory stance,” Long noted, pointing to the Federal Reserve’s explicit concerns about crypto activities in their denial of Custodia’s application.

Regulatory hostility toward crypto banking intensifies as federal agencies maintain rigid stance following FTX collapse, hampering industry growth and innovation.

The debanking phenomenon has emerged as a critical issue within the cryptocurrency sector, with numerous industry leaders reporting similar experiences. Marc Andreessen has characterized the situation as “operation choke point 2.0,” while multiple crypto founders have reported being denied banking services during the current administration’s tenure.

Coinbase’s Chief Legal Officer, Paul Grewal, has documented 23 Pause Letters issued to banks, highlighting what appears to be a coordinated effort to curtail crypto-related banking activities. “These actions represent a systematic approach to limiting cryptocurrency operations within traditional banking frameworks,” Grewal stated.

Looking toward future solutions, Long emphasizes the urgent need for consumer protection and stablecoin legislation. She points to concerning statistics about bank cash reserves, noting that institutions currently maintain an average of just 8 cents for every dollar of demand deposits.

“This inadequate reserve system leaves banks vulnerable to runs and highlights the need for extensive reform,” Long explained, advocating for stronger regulatory frameworks that would protect both traditional and crypto banking operations while ensuring adequate cash reserves against deposits.