Despite Donald Trump’s return to the White House, the US crypto banking sector remains frozen, with no regulatory breakthroughs to support digital asset integration, according to Custodia Bank CEO Caitlin Long.
At ETHDenver on Feb. 28, Long debunked the idea that Trump’s return has eased crypto banking restrictions.
“None of the federal banking agencies have actually overturned any of the anti-crypto guidance,” Long said.
She emphasized that under current rules, banks are still discouraged from dealing with crypto firms, stating:
“It is still presumed unsafe and unsound for a bank to touch a digital asset even in a de minimis amount.”
While she believes regulatory changes will eventually come, she pointed out that Trump has not proposed any concrete banking reforms for crypto yet.
FDIC Leadership Change Could Signal a Shift
Long also blamed regulatory stagnation on the Federal Deposit Insurance Corporation (FDIC), which she argues has been resistant to financial innovation for over a decade.
“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,” Long said, referring to former FDIC Chair Martin Gruenberg.
Gruenberg, who was replaced by Acting Chair Travis Hill on January 20, has been widely accused of leading “Operation Chokepoint 2.0”—a supposed federal effort to debank crypto firms.
While his departure is seen as a step toward more progressive banking policies, no new pro-crypto measures have been introduced yet.
SEC’s Crypto Stance Shifts
While banking regulations remain tight, Long acknowledged that the Securities and Exchange Commission (SEC) has taken a drastically different approach toward crypto.
Just one day after Trump’s inauguration, the SEC established a Crypto Task Force led by Hester Peirce, signaling a major shift in regulatory direction.
The agency also reversed its controversial Staff Accounting Bulletin 121 (SAB 121)—a rule that required financial firms holding crypto to record them as liabilities on their balance sheets. This move was widely seen as a step toward mainstream institutional adoption.
Long now hopes the banking sector follows the SEC’s lead in easing restrictions on digital asset firms.
Stablecoin Legislation and Consumer Protection Remain Key Issues
Beyond banking restrictions, Long also pushed for stronger consumer protections in stablecoin regulation.
She highlighted the fundamental instability of the traditional banking system, noting:
“The average bank in the United States right now holds 8 cents in cash against every $1 of demand deposits… That’s fundamentally unstable and fundamentally susceptible to a bank run.”
Referencing Silvergate Bank’s collapse, Long warned that banks backing stablecoins must hold cash reserves rather than engaging in high-risk lending practices.
For stablecoins to be a legitimate part of the financial system, Long believes issuers must be required to hold 1:1 reserves to fully back their digital assets.
What’s Next?
While Trump has made pro-crypto remarks, his administration has yet to take concrete steps to support crypto banking integration.
For meaningful change, Long argues that the administration must:
- Appoint a new FDIC chair willing to embrace innovation.
- Ease banking restrictions for crypto firms.
- Ensure stablecoin issuers hold adequate reserves to prevent systemic risks.
With the SEC already shifting its stance, crypto advocates are now waiting to see if banking regulators will follow suit or if crypto banking will remain frozen under Trump’s watch.
Final Takeaway
Despite optimism about Trump’s potential crypto-friendly policies, the US banking system remains unchanged for crypto firms.
Until the administration proposes actual reforms, crypto entrepreneurs and investors will remain locked out of traditional banking services, leaving the industry in a regulatory waiting game.
With the SEC shifting gears, all eyes are now on Trump. Will he act, or will crypto banking remain gridlocked?
