Court Dismisses Custodia Bank’s Challenge Against Federal Reserve

March 31, 2024 Bitcoin.com

South African Professor Accuses US Regulators of Attempting to ‘Assassinate Crypto’

April 6, 2023 Bitcoin.com

A Look at the Fed’s Recent Custodia Bank Denial and the Central Bank’s Push Back Against Narrow Banking

March 27, 2023 Bitcoin.com

Flagstar Bank Acquires Signature Bank’s Assets and Branches, Excluding Cryptocurrency Operations

March 20, 2023 Bitcoin.com

US Fed to create new crypto team amid concerns about unregulated stablecoins

March 10, 2023 Coin Telegraph

Caitlin Long

The Fed’s Vice Chair for Supervision emphasized that they do not want to curb innovation, but ensure that regulations protect households and the financial system.

The United States Federal Reserve is set to create a “specialized team of experts” to keep up with developments in the cryptocurrency industry, according to a Fed official, amid concerns from the Fed of “unregulated” stablecoins.

Speaking at the Peterson Institute for International Economics in Washington on Mar. 9, Vice Chair for Supervision Michael Barr admitted that crypto could have a “transformative effect” on the financial system, but added that “the benefits of innovation can only be realized if appropriate guardrails are in place.”

According to Barr, the new crypto team will help the Federal Reserve “learn from new developments and make sure we’re up to date on innovation in this sector,” adding:

“Innovation always comes quickly, but it takes time for consumers to become aware that they could both gain and lose money on new financial products.”

Meanwhile, Barr noted that regulation needs to be a “deliberative process” to ensure a balance is reached between over-regulation which “will stifle innovation” and under-regulation which “will allow for substantial harm to households and the financial system”

One subsect of crypto that Barr highlighted as a point of concern was stablecoins.

He suggested that the assets backing many stablecoins in circulation are illiquid, meaning that it can be difficult to liquidate them for cash when needed, arguing:

“This mismatch in value and liquidity is the recipe for a classic bank run.”

He believes that unless regulated by the Fed, any widespread adoption of stablecoins could put households, businesses, and the broader economy at risk.

Caitlin Long, the CEO of Custodia Bank — which has consistently been rejected from joining the Federal Reserve System — pointed out the irony in the comments from Barr given her belief that Silvergate Bank collapsed due to liquidity issues arising from a bank run.

UM, WASN'T THE FED #Silvergate's REGULATOR?‍♀️
"The banks we regulate, in contrast, are well protected from bank runs thru a robust array of supervisory requirements."--Fed Vice Chair Supervision Michael Barr, speaking this morning(!)
h/t @ByKyleCampbell https://t.co/7UsHDKfiaC
— Caitlin Long ⚡️ (@CaitlinLong_) March 9, 2023

Long also pointed to the current issues facing Silicon Valley Bank, whose shares plummeted after a Mar. 8 financial update disclosed that it sold $21 billion worth of its holdings at a $1.8 billion loss, prompting fears that it was forced to sell to free up capital.

FRIENDLY REMINDER that, right as the panic was happening in Silicon Valley, the Fed’s Vice Chair for Supervision Barr said in a speech: "The banks we regulate, in contrast, are well protected from bank runs thru a robust array of supervisory requirements."https://t.co/FpPl2Qlk7x
— Caitlin Long ⚡️ (@CaitlinLong_) March 10, 2023

US Federal Reserve denies Custodia Bank’s request for Fed supervision

February 23, 2023 Coin Telegraph

application

The Federal Reserve Board has denied the request from crypto-focused Custodia Bank to reconsider its membership to the Federal Reserve System.

The United States Federal Reserve has denied a request from cryptocurrency bank Custodia Bank to reconsider its membership application to the Federal Reserve System.

The Fed announced its denial on Feb. 23 saying the Federal Reserve Board previously decided that Custodia’s application “was inconsistent with the required factors under the law.”

@federalreserve announces it has denied the request by Custodia Bank, Inc., for reconsideration of the Board’s decision last month on its application to be supervised by the Federal Reserve: https://t.co/ZYNUEoLeN1
— Federal Reserve (@federalreserve) February 23, 2023

In January, the Fed rejected Custodia’s application to become a member. Board rules allow applicants to request a reconsideration of membership decisions.

At the time of the initial rejection, the Fed claimed Custodia had an “insufficient” management framework.

It also cited a joint declaration it made alongside the Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC) that claimed cryptocurrencies were “inconsistent with safe and sound banking practices.”

Custodia has said it wishes to join the Federal Reserve System so it can be regulated under the standards that apply to traditional banks and open a path for other crypto-banks that wish to be held to those same heightened standards.

Custodia Bank CEO slams Washington’s ‘misguided crackdown’ on crypto

February 18, 2023 Coin Telegraph

Caitlin Long

Caitlin Long revealed that she had warned government agencies of major “fraud” in the crypto space months before several firms went bankrupt.

The CEO of Custodia Bank Caitlin Long has slammed regulators and lawmakers in Washington D.C. for their “misguided crackdown” on the crypto sector, and also for ignoring her warnings of major “fraud” allegedly conducted by now-bankrupted entities.

In a Feb. 17 blog post titled “Shame On Washington, DC For Shooting A Messenger Who Warned of Crypto Debacle,” Long tore into the government for its approach to crypto regulation, failing to protect investors and alienating good actors in the space:

“Washington’s misguided crackdown will only push risks into the shadows, leaving regulators to play whack-a-mole as the risks continuously pop up in unexpected places.”

Long stressed that with her digital asset custody firm, she’s “been calling out the worst of crypto while trying to build a lawful, compliant alternative that relegates scams to the trash heap. But [...] most of today’s policymakers seem intent on killing the high-integrity innovators.”

The Custodia Bank CEO claimed that her efforts to work with government agencies were ultimately thrown back in her face, as she recounted the spate of negative run-ins her firm has had of late.

“Custodia was simultaneously attacked by the White House, the Federal Reserve Board of Governors, the Kansas City Fed and Senator Dick Durbin (who conflated our non-leveraged, 100-percent liquid and solvent bank with FTX in a Senate floor speech),” she said, adding that:

“Custodia tried to become federally regulated – the very result bipartisan policymakers claim to want. Yet Custodia has been denied and now disparaged for daring to come through the front door.”

Her sentiments echo that of figures such as Coinbase CEO Brian Armstrong, who has suggested on multiple occasions that the agencies such as the Securities and Exchange Commission (SEC) have reacted frostily to his firm’s efforts to maintain a dialogue in good faith.

Earlier this month, Armstrong also criticized the lack of regulatory clarity in the U.S. and what appears to be a “regulation by enforcement” approach following the SEC’s move to shut down Kraken’s staking services on Feb. 9.

“Today’s regulators and lawmakers in Washington are no doubt embarrassed that they failed to stop the criminals of crypto. DC is demanding scalps,” Long wrote in the blog post, adding that:

“Calls for a crackdown today are coming from many of the same policymakers who were charmed by the fraudsters. In a 180-degree turn, they’re now throwing the baby out with the bathwater.”

Unheeded warnings

Over on Twitter, Long also suggested that well before the implosion of several crypto firms in 2022, she and many others had tried to warn Washington and “help law enforcement stop” major fraud, but to no avail.

Long stated that she was publicly disclosing for the first time that she had “handed over evidence to law enforcement of probable crimes” committed by an unnamed crypto firm “ months before that company imploded and stuck its millions of customers with losses.”

1/ IT'S TIME FOR ME TO REVEAL A FEW THINGS. I've just published a post "Shame On Washington, DC For Shooting A Messenger Who Warned Of #Crypto Debacle." Link to post is here:https://t.co/yTWWrEk3Os pic.twitter.com/rbo21DzOv3
— Caitlin Long ⚡️ (@CaitlinLong_) February 17, 2023

Kraken co-founder and CEO Jesse Powell responded to Long’s Twitter thread, and essentially corroborated her statements by noting that: “I can't tell you how infuriating it is to have pointed out massive red flags and obviously illegal activity to regulators only to have them ignore the issues for years.”

I can't tell you how infuriating it is to have pointed out massive red flags and obviously illegal activity to regulators only to have them ignore the issues for years. "They're offshore. It's complicated. We're looking at everybody." FOR YEARS. Then to be used as their example. https://t.co/YHdNazM2UE
— Jesse Powell (@jespow) February 18, 2023

Custodia Bank

Unheeded warnings

Share this video