Recent efforts to “debank” crypto firms in the US revealed a “staggering” level of corruption among government officials, and the problem is not yet resolved, one banking executive said in a Feb. 27 interview during Bitcoin Investor Week. 

“The magnitude of skullduggery that is happening in Washington D.C. is really incredible… and it’s not over yet,” Caitlin Long, Custodia Bank’s founder and CEO, said during a panel at the event.  

In 2023, the US Federal Reserve, which regulates banks, stymied Custodia’s efforts to service crypto firms by denying the bank access to a master account, citing Custodia’s involvement in “crypto-asset-related activities.” 

A master account would allow the bank to custody assets directly with the central bank and access payment rails for inter-bank transfers. Custodia took legal action against the Fed in a bid to reverse the decision. 

Related: FDIC releases 790 pages of crypto-related letters in regulatory pivot

Industry outrage over alleged debanking reached a crescendo when a June 2024 lawsuit spearheaded by ​​Coinbase resulted in the release of letters showing US banking regulators asked certain financial institutions to “pause” crypto banking activities.

US President Donald Trump, who started his term on Jan. 20, has criticized the prior administration’s approach to crypto-friendly banks and vowed to better integrate cryptocurrencies, including stablecoins, into the regulated financial system. 

In a Jan. 23 executive order, Trump told agencies to prioritize “fair and open access to banking services” for digital asset firms.

Stablecoin scrum

However, the battle for regulatory clarity isn’t over, Long said. Instead, it has evolved into a multi-directional fight among different types of stablecoin issuers seeking preferential rules, she said. 

There is an ongoing “scrum between the big banks… and the incumbent stablecoin issuers, and then there’s Tether,” which is not based in the US, Long said. 

The result has been “this incredible flow of money that has gone from the banks and the crypto industry to people in [Washington] D.C., and they’re all going to fight,” Long said. 

“I don’t know how it’s going to come out,” she added.

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