Despite expectations of a more crypto-friendly environment, Custodia Bank CEO Caitlin Long asserts that the Trump administration has yet to address the ongoing issue of debanking within the cryptocurrency industry.
Unfulfilled Expectations for Crypto Banking Reform
At the ETHDenver conference on February 28, Custodia Bank CEO Caitlin Long expressed concerns regarding the lack of progress in integrating cryptocurrency services into the traditional banking system under President Donald Trump’s administration. She highlighted that, despite perceptions of a more favorable stance toward digital assets, federal banking agencies have not revised or overturned existing anti-crypto guidelines.
Long emphasized that banks continue to view digital assets as inherently risky, stating, “It is still presumed unsafe and unsound for a bank to touch a digital asset even in a de minimis amount.” She noted that, as of now, no substantive changes have been implemented to alter this perspective.
Anticipated Changes in Regulatory Leadership
Long pointed out the necessity for new leadership within key regulatory bodies to facilitate change. She specifically mentioned the Federal Deposit Insurance Corporation (FDIC), which has been resistant to technological advancements over the past 15 years under former Chair Martin Gruenberg. With Gruenberg replaced by Acting Chair Travis Hill on January 20, there is potential for a shift in the FDIC’s approach to digital assets.
SEC’s Shift in Crypto Policy
While the banking sector has remained static, Long acknowledged a significant policy reversal by the Securities and Exchange Commission (SEC). On January 21, the SEC established a Crypto Task Force led by Commissioner Hester Peirce, signaling a more supportive approach to cryptocurrency regulation. The SEC also rescinded Staff Accounting Bulletin 121, which had required financial firms holding crypto assets to record them as liabilities on their balance sheets.
The Need for Stablecoin Legislation and Consumer Protection
Long advocates for the prompt passage of stablecoin legislation in the United States, emphasizing the importance of robust consumer protections. She highlighted the current banking model’s instability, where banks hold approximately 8 cents in cash for every dollar of demand deposits, making them susceptible to bank runs. To safeguard consumers, Long recommends that stablecoin issuers maintain full cash reserves to back their digital assets.
In conclusion, despite initial optimism surrounding the Trump administration’s potential to foster a more crypto-friendly environment, tangible changes in banking regulations concerning digital assets have yet to materialize. Industry leaders like Caitlin Long continue to advocate for regulatory reforms and consumer protections to ensure the stable integration of cryptocurrencies into the broader financial system.
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