Wyoming-based crypto bank Custodia is reportedly considering additional layoffs as it prepares to face persistent regulatory scrutiny from the Biden administration. The decision comes as the crypto sector faces unprecedented challenges, including the loss of banking relationships and growing pressure from US regulators.
Meanwhile, Cryptocurrency market participants still maintain hope for a better regulatory environment, and expect policy changes when the Donald Trump administration takes office.
Custodia plans to lay off more staff amid regulatory pressure
Custodia Bank may proceed with further layoffs after already cutting 25% of its staff in August. The decision comes as the digital asset-focused bank continues to focus on its ongoing lawsuit with The Federal Reserve (Fed), which denied key accounts to the bank last year.
“Fox Business has learned that Wyoming-based crypto bank Custodia will make additional layoffs to preserve capital,” Fox Business reporter Eleanor Terrett reported.
The bank did not immediately respond to TinTucBitcoin’s request for comment on the expected layoffs. In early 2023, Custodia Bank was denied a master account, which would have given the bank access to Fed liquidity facilities. The lawsuit seeks to challenge this denial.
Custodia Bank has been trying to preserve capital as it continues its legal battle against the Fed. During the last round of layoffs three months ago, the company’s founder and CEO, Caitlin Long, said the layoffs were for the “rescaling” needed to maintain operations and conserve capital. while facing a lawsuit.
Ms. Long also indicated that these efforts may continue “until Operation Tighten 2.0 ends,” alluding to the ongoing crackdown on digital assets under the Biden administration. Operation Tighten was an Obama-era effort to “secretly shut down” high-risk industries such as predatory lending, gambling, and weapons from access to banks.
“I am incredibly proud of the Custodia team, the service we are building for our customers and our resilience in the face of losing banking relationships through no fault of our own. I especially thank Custodia’s customers and shareholders for helping us continue the fight for sustainability in banking access for the crypto industry in compliance with U.S. laws,” Terrett quoted Long as saying.
Notably, oral arguments in the case will take place on January 21. This will be the day after Donald Trump takes office, following his recent victory.
Regulatory pressure increases but there is hope for change under Trump
Custodia is not the only one struggling with regulatory pressure. The crypto industry as a whole has recently faced increasing regulatory challenges. Prominent companies such as Consensys also recently announced they would cut staff significantly.
As TinTucBitcoin reported in late October, the blockchain software company behind Ethereum infrastructure tools like MetaMask revealed that it is cutting its workforce by 20%. The company’s CEO, Joe Lubin, mentioned increased pressure from the US Securities and Exchange Commission (SEC), along with other uncertainties in the regulatory space.
“Macroeconomic conditions throughout the past year and ongoing regulatory uncertainty have created significant challenges for our industry, especially for U.S.-based companies,” Lubin share.
Meanwhile, the Biden administration has been accused of adopting an increasingly aggressive stance towards the crypto industry. Among the allegations were also the enforcement of strict banking restrictions and loss of access to banking. However, Trump’s recent victory and upcoming inauguration have sparked hopes in the crypto sector for a more supportive regulatory environment.
This hope depends on Trump’s plans for crypto. Experts believe Trump’s business-friendly stance could revive the industry by reducing regulatory pressure on crypto.
Brian Armstrong, CEO of Coinbase, also expressed optimism about a possible shift in regulatory approach. Armstrong recently urged the next SEC chairman to drop “baseless lawsuits” against crypto companies and issue a public apology. He criticized the current composition of the SEC for its heavy-handed enforcement, criticizing Gary Gensler.
“The next SEC chairman should withdraw all baseless lawsuits and issue an apology to the American people. This will not undo the damage done to the country, but will begin the process of restoring trust in the SEC as an institution,” Armstrong said. posted.
However, Custodia’s ongoing lawsuit is emblematic of the crypto industry’s fight for legitimacy and fair treatment in the financial sector. While the industry’s outlook may remain uncertain in the short term, there is cautious optimism that the incoming Trump administration could bring relief to struggling crypto companies.