Biden’s Crypto Crackdown Hits Custodia Bank: Workforce Reductions Announced

In response to the Biden administration’s intensified scrutiny on the crypto industry, Custodia Bank, a notable Wyoming-based financial institution catering to crypto businesses, has recently undergone a significant restructuring. 

As reported by FOX Business on Thursday, Custodia Bank has made the decision to lay off nine of its 36 employees, a move aimed at conserving capital amidst mounting legal battles with the Federal Reserve (Fed).

Per the report, the core of Custodia Bank’s current challenges lies in its pursuit to obtain a master account, a gateway for state-chartered banks to access the Federal Reserve’s liquidity facilities and payment services. 

Without this account, banks like crypto-friendly Custodia are compelled to engage in transactions through intermediary institutions, incurring elevated costs in the process.

Concurrently, regulatory bodies have been cautioning conventional banks against associating with digital asset entities, citing concerns over the alleged risks posed by the crypto industry’s price volatility and “regulatory ambiguity at the federal level.”

Custodia Bank, though modest in size, fulfills a key role by extending banking services to businesses that have encountered difficulties in securing financial services elsewhere. 

The bank attributes the recent layoffs to what they term as the federal government’s “Operation Chokepoint 2.0,” a concept gaining traction in the crypto industry during the past years. 

This phrase, reminiscent of the Obama-era “Operation ChokePoint,” symbolizes what Custodia perceives as a coordinated effort by the current administration to isolate the industry from the broader financial landscape.

Caitlin Long, founder and CEO of Custodia Bank, conveyed her sentiments on the matter, underlining the detrimental impact of “Operation Choke Point 2.0” on the lawful US crypto sector. 

Long emphasized the bank’s commitment to right-sizing operations to navigate the current challenges and safeguard resources until a resolution is achieved in the ongoing legal battle or until the regulatory environment evolves favorably.

While authorities like Deputy Treasury Secretary Wally Adeyemo have refuted claims of a systematic campaign to exclude the digital asset sector from the financial mainstream, instances of banks severing ties with entities involved in cryptocurrencies have surfaced. Custodia Bank itself revealed that two of its partner institutions terminated collaborations due to their association with the bank.

These developments unfold against the backdrop of the November elections that holds significant implications for the crypto industry. With former President Trump, known for his embrace of Bitcoin, poised to contend against Vice President Harris in the upcoming election, uncertainties loom over the industry’s future trajectory. 

In addition, the absence of definitive statements from Vice President Harris regarding her stance on digital assets has left industry participants speculating about her potential influence on the administration’s crypto-related policies.

Featured image from DALL-E, chart from TradingView.com