Caitlin Long

Custodia Bank CEO slams Washington’s ‘misguided crackdown’ on crypto

Caitlin Long revealed that she had warned government agencies of major “fraud” in the crypto space months before several firms went bankrupt.

The CEO of Custodia Bank, Caitlin Long, has slammed regulators and lawmakers in Washington D.C. for their “misguided crackdown” on the crypto sector and ignoring her warnings of major “fraud” allegedly conducted by now-bankrupted entities.

In a Feb. 17 blog post titled, Shame On Washington, DC For Shooting A Messenger Who Warned of Crypto Debacle, Long tore into the government for its approach to crypto regulation, failing to protect investors and alienating good actors in the space:

“Washington’s misguided crackdown will only push risks into the shadows, leaving regulators to play whack-a-mole as the risks continuously pop up in unexpected places.”

Long stressed that with her digital asset custody firm, she’s “been calling out the worst of crypto while trying to build a lawful, compliant alternative that relegates scams to the trash heap. But […] most of today’s policymakers seem intent on killing the high-integrity innovators.”

The Custodia Bank CEO claimed that her efforts to work with government agencies were ultimately thrown back in her face as she recounted the spate of negative run-ins her firm has had of late. 

“Custodia was simultaneously attacked by the White House, the Federal Reserve Board of Governors, the Kansas City Fed and Senator Dick Durbin (who conflated our non-leveraged, 100-percent liquid and solvent bank with FTX in a Senate floor speech),” she said, adding that:

“Custodia tried to become federally regulated – the very result bipartisan policymakers claim to want. Yet Custodia has been denied and now disparaged for daring to come through the front door.”

Her sentiments echo that of figures such as Coinbase CEO Brian Armstrong, who has suggested on multiple occasions that agencies like the Securities and Exchange Commission (SEC) have reacted frostily to his firm’s efforts to maintain a dialogue in good faith.

Earlier this month, Armstrong also criticized the lack of regulatory clarity in the U.S. and what appears to be a “regulation by enforcement” approach following the SEC’s move to shut down Kraken’s staking services on Feb. 9.

“Today’s regulators and lawmakers in Washington are no doubt embarrassed that they failed to stop the criminals of crypto. DC is demanding scalps,” Long wrote in the blog post, adding that:

“Calls for a crackdown today are coming from many of the same policymakers who were charmed by the fraudsters. In a 180-degree turn, they’re now throwing the baby out with the bathwater.”

Unheeded warnings

Over on Twitter, Long also suggested that well before the implosion of several crypto firms in 2022, she and many others had tried to warn Washington and “help law enforcement stop” major fraud, but to no avail.

Related: SEC vs. Kraken: A one-off or opening salvo in an assault on crypto?

Long publicly disclosed for the first time that she had “handed over evidence to law enforcement of probable crimes” committed by an unnamed crypto firm “months before that company imploded and stuck its millions of customers with losses.”

Kraken co-founder and CEO Jesse Powell responded to Long’s Twitter thread and corroborated her statements by noting that: “I can’t tell you how infuriating it is to have pointed out massive red flags and obviously illegal activity to regulators only to have them ignore the issues for years.”


Wyoming lawmakers pass bill to prevent forced disclosure of private keys

If Wyoming Governor Mark Gordon signs the bill, from July 1 individuals in Wyoming will be protected from being forced to divulge their private keys, with one limited exception.

Wyoming lawmakers have passed a bill that will prohibit courts in the state from forcing someone to disclose their digital asset private keys, with one minor exception.

The bill was passed by a vote of 41-13 in the Wyoming House of Representatives on Feb. 15, a day after passing 31-0 in the Wyoming Senate.

If the bill is approved by Wyoming Governor Mark Gordon, the law will come into effect on July 1.

The new law — W.S. 34-29-107 — titled “Production of private keys; prohibition.” Source: The State of Wyoming Legislature

“No person shall be compelled to produce a private key or make a private key known to any other person in any civil, criminal, administrative, legislative or other proceeding[s]” in the state of Wyoming, the incoming law reads.

The law includes any private keys associated with digital assets, one’s digital identity or any other interests or rights to which the private key provides.

The minor exception involves when a public key is unavailable or is unable to disclose details of the digital asset, digital identity or other interest or right.

However, the act also states that the new law will not bar one from being compelled “to produce, sell, transfer, convey or disclose a digital asset, digital identity or other interest or right” that a private key could provide access to.

It also doesn’t prevent one from being compelled to “disclose information about the digital asset, digital identity or other interest or right.”

The new law — W.S. 34-29-107 — will be titled “Production of private keys; prohibition.”

The private keys legislation comes under Chapter 29 — Digital Assets which is a subset of Title 34 — Property, Conveyances and Security Transactions.

Related: Death and self-custody: How to pass on your crypto when you die

The passing of the bill comes as the private key law has been in the works since as early as September 2019.

Wyoming has long been touted as one of the most crypto-friendly states in the U.S.

It was the first state in the U.S. to declare a decentralized autonomous organization (DAO) as a limited liability company (LLC) in July 2021, and has previously considered a state-issued stablecoin in February 2022 — however, it appears that those endeavors haven’t progressed too much since then.