Caitlin Long’s Custody Bank cuts workforce under pressure from crypto regulations

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Custodia Bank, a cryptocurrency-friendly bank founded by Wall Street veteran Caitlin Long, has cut its workforce from 36 to 27 employees as part of the bank’s efforts to preserve capital while trying to resolves its legal and operational hurdles with the Federal Reserve, as reported by FOX Business on Thursday.

Long said “Operation Chokepoint 2.0,” a program perceived as the Biden administration’s regulatory crackdown on the crypto industry by the community, “has been devastating” to law-abiding US crypto businesses like Custodia Bank.

Despite Custody’s strong track record in risk management and compliance, the bank has struggled to overcome these regulatory challenges.

Custody is currently engaged in a legal battle with the Federal Reserve (Fed) over its request for a master account, which is essential for accessing the Fed’s payment systems. Without this account Custodia faces higher operational costs as it must rely on other banks with such access.

“We are right-sized so that we can maintain operations while preserving capital until Operation Choke Point 2.0 ends or after our process with the Fed is successfully concluded,” Long explained.

The cuts come as the broader banking sector remains wary of getting involved with crypto firms, influenced by federal warnings about the risks associated with digital assets.

According to Custody, two of its partner institutions have terminated relations with the bank due to its association with crypto.

The term “Choke Point 2.0” is often described as a renewed effort by a number of US regulatory bodies, including the Securities and Exchange Commission (SEC), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Controller of the Currency. (OCC), to restrict access to banking services for the crypto industry.

The initiative is believed to have effectively discouraged these firms from operating within the traditional financial system.

Tyler Winklevoss, co-founder of the Gemini cryptocurrency exchange, previously spoke about the implications of Operation Choke Point 2.0, especially in light of the Fed’s recent actions against Customers Bank.

He also warned that the regulatory environment for crypto could become even stricter if Vice President Kamala Harris wins the presidency.

Today, the Fed confirmed that Operation Choke Point 2.0 remains in full swing, provided valuable insight into how it works, and verified that the crypto-Harris “reset” is a scam. The Fed revealed all of this in a 13-page enforcement action it issued this morning against… pic.twitter.com/zhLRRWAH0E

— Tyler Winklevoss (@tyler) August 9, 2024

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