Caitlin Long: No Progress on Crypto Debanking Since Trump’s Return

Custodia Bank CEO Caitlin Long has voiced frustration over the lack of progress in addressing crypto debanking issues in the United States since former President Donald Trump’s return to the White House. Speaking at ETHDenver on February 28, Long criticized the U.S. government for failing to take concrete action to resolve the challenges facing the cryptocurrency industry, despite perceptions that the Trump administration might take a more crypto-friendly approach than its predecessor.

Lack of Action on Crypto Debanking

Long pointed out that while there is a public perception that U.S. federal agencies have softened their stance on crypto, in reality, “nothing” has changed. She emphasized that no federal banking agency has reversed or even reconsidered the anti-crypto guidance that continues to affect the industry. According to Long, it is still widely assumed that it is unsafe or unsound for a bank to engage with digital assets, even in minimal amounts.

“None of the federal banking agencies have actually overturned any of the anti-crypto guidance,” Long said, adding that the situation has remained stagnant. “That is going to change, no doubt, but Trump hasn’t proposed anything yet.” She noted that despite the crypto-friendly reputation of the Trump administration, the issue of debanking remains unresolved, leaving crypto businesses and users vulnerable.

Federal Deposit Insurance Corporation's Resistance to Change

One major roadblock, according to Long, is the leadership at the Federal Deposit Insurance Corporation (FDIC), which she claims has been resistant to modernizing banking regulations to keep pace with technological advancements. Long pointed out that under the leadership of Martin Gruenberg, who served as FDIC chair for 15 years, the agency has been largely opposed to incorporating changes that could support the growing crypto industry.

Long’s criticism was pointed: “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.” Gruenberg was replaced by Acting Chair Travis Hill on January 20, 2025, sparking hopes that there could be a shift in regulatory attitudes under new leadership. Gruenberg had also been accused of playing a central role in "Operation Chokepoint 2.0," a controversial initiative aimed at cutting off financial services to the crypto sector.

Shifts in SEC Policy, but Banking Regulations Lagging

While Long acknowledged that the U.S. Securities and Exchange Commission (SEC) had made significant strides in its approach to crypto, she noted that the banking sector had yet to catch up. Specifically, Long pointed to the SEC’s pivot, including the formation of a Crypto Task Force led by Commissioner Hester Peirce, which has been instrumental in refining the SEC’s stance on digital assets. The SEC also took a major step by canceling Staff Accounting Bulletin 121, a rule that had required financial firms to treat cryptocurrencies as liabilities on their balance sheets.

However, Long expressed hope that similar regulatory changes would eventually occur within the banking system. She emphasized that while the SEC’s policies were evolving, banking regulations remained stuck in the past.

Stablecoin Legislation and Consumer Protection

Long also discussed the potential for much-needed stablecoin legislation in the U.S., expressing optimism that such laws would soon be passed. However, she stressed that stronger consumer protections would need to be implemented, particularly in regard to the stability of banks and the management of funds.

Currently, U.S. banks hold only a small fraction of cash relative to demand deposits, with the average bank holding just 8 cents in cash for every $1 of demand deposits. Long described this practice as “fundamentally unstable” and a potential risk for a bank run. She cited the collapse of Silvergate Bank as an example of why this model does not work in the crypto space. For stablecoin issuers, Long argued, it’s crucial to require them to hold actual cash reserves to back the stablecoin liabilities, ensuring financial stability for consumers.

The Road Ahead for Crypto Regulation

As the crypto industry continues to grow and evolve, Long remains hopeful that the U.S. government will eventually address these critical issues, including debanking and regulatory clarity for digital assets. However, she made it clear that until meaningful changes are made in both banking and regulatory policies, the crypto sector will continue to face significant obstacles.