MJP –
A federal lawsuit about a disallowed “master account” has caused a Wyoming bank to lay off employees and halt expansion plans.
As it continues its legal struggle with the Federal Reserve over a refused master account, Custodia Bank, a Wyoming-chartered institution that focuses on digital assets, has laid off some workers.
The bank is “right-sizing” to keep running while preserving capital, according to a statement from CEO and founder Caitlin Long, which Banking Dive cited in an article about the bank’s lawsuit against the Federal Reserve.
She went on to say that the layoffs would continue until the end of what she called “Operation Choke Point 2.0,” a reference to the Biden administration’s purported continuous onslaught on digital assets.
Payday lending and gambling are examples of high-risk businesses that were the target of an Obama-era effort to limit their access to banking.
Fox Business reports that on Thursday, Custodia informed its employees that nine of the thirty-six workers will be let go.
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The Federal Reserve’s liquidity capabilities, including payment services, were inaccessible to Custodia Bank when it applied for a master account early last year.
The case is still ongoing since a federal judge determined in April that the Fed is not obligated to provide a master account to every qualifying institution.
An insider says that Custodia is having trouble because of the high expenses of not having its own Fed master account.
Reportedly, the bank has been under covert pressure from Federal Reserve officials and has been debanked twice by partner institutions.
In an email, Caitlin Long said that the US crypto industry’s compliance has taken a major hit due to the crackdown on digital assets; even Custodia, which has a reputation of good risk management and compliance, has felt the pinch.
Prominent Democrats attempted to repair relations with members of the cryptocurrency business by holding a Zoom meeting with them this month.
But things became heated when Deputy Treasury Secretary Wally Adeyemo said that no one was trying to keep the cryptocurrency industry out of conventional banks.
When a crypto CEO followed up by asking the audience to raise their hands if they had been refused banking services as a result of White House regulations, almost every person from the industry did so.
The specific positions impacted by the latest layoffs were not disclosed by a Custodia representative.
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