Custody Bank, a bank specializing in digital assets, has laid off some employees amid a dispute with the Federal Reserve over its master account.
Founder and CEO Caitlin Long said in an emailed statement to Banking Dive that the bank ““We will right-size the business to continue operating while preserving capital.” She said that until the end of Custody’s lawsuit against the Fed or “until Operation Chokepoint 2.0 is over,” referring to the Biden administration’s reported ongoing crackdown on digital assets, the name of an Obama-era effort to “kick” high-risk industries like payday lending, gambling and firearms out of banking.
Custodia notified employees on Thursday that it was laying off nine of its 36 employees, Fox Business said. Reported.
The bank was denied the opportunity to open a master account that would have given it access to the Fed’s liquidity facilities, including payment services. Early last yearIn April, A federal judge ruled Federal law does not require the Fed to offer master accounts to all eligible institutions. Litigation is ongoing.
A person familiar with the matter told Banking Dive that Custody is operating at a loss because of the high costs of not having its own Fed master account: It has had its accounts stolen from partner banks twice and is “being harassed behind closed doors by Fed regulators,” the person said.
In an emailed statement, Long said the digital asset crackdown “has dealt a devastating blow to the law-abiding U.S. cryptocurrency industry, hitting Custody Bank hard despite its strong risk management and compliance track record.”
Key Democratic lawmakers met with crypto industry figures via Zoom this month in an attempt to repair relations. Fox Business The news broke on August 8. But the meeting also had some sore spots: After Deputy Treasury Secretary Wally Adeyemo told attendees that the government has not made a concerted effort to insulate the cryptocurrency world from the traditional financial system, crypto company executives asked for a show of hands if any of their companies have been denied banking services due to White House policies.
Nearly every industry representative raised their hand, two attendees told Fox Business.
A Custody spokesperson did not provide details to Banking Dive about which roles would be affected by Thursday’s job cuts.
