Digital asset-focused Custodia Bank has laid off some employees amid its current battle with the Federal Reserve for a master account.
Founder and CEO Caitlin Long said in an emailed statement to Banking Dive that the bank was “right-sizing so we can maintain operations while preserving capital” during Custodia’s lawsuit against the Fed or “until after Operation Choke Point 2.0 ends,” she said, referring to the alleged ongoing crackdown on digital assets under the Biden administration. Operation Choke Point was the name of an Obama-era effort that “choked off” high-risk industries like payday lending, gambling and firearms from banking access.
Custodia notified employees Thursday that nine of its 36 employees were being laid off, Fox Business reported.
The bank was denied a master account, which would give it access to the Fed’s liquidity facilities, including payment services, early last year. In April, a federal judge ruled that federal laws do not require the Fed to give every eligible institution a master account. The lawsuit is ongoing.
A person with knowledge of the matter told Banking Dive that Custodia is operating with its hands tied because of the high cost of not having its own Fed master account. It’s been debanked twice by partner banks, and “harassed by Fed regulators behind the scenes,” the person said.
Long said in an emailed statement that the digital-asset crackdown “has been devastating for the law-abiding U.S. crypto industry, and Custodia Bank has been hit hard despite our strong risk management and compliance track record.”
Leading Democrats met with members of the crypto industry this month via Zoom in an attempt to repair relations, Fox Business reported Aug. 8. The meeting, however, had some sore spots: After Deputy Treasury Secretary Wally Adeyemo told attendees that the government had no coordinated effort to block the crypto world from the traditional financial system, a crypto executive asked for a show of hands of whose companies had been turned down for banking services due to White House policies.
Nearly all of the industry representatives raised their hands, two attendees told Fox Business.
A spokesperson for Custodia did not elaborate to Banking Dive on the roles affected by Thursday’s layoffs.
