Operation Chokepoint 2.0 isn’t over yet, says Custodia’s Caitlin Long

Custodia Bank CEO Caitlin Long disputes Vice President JD Vance’s statement that Operation Chokepoint 2.0 has ended.

Long argues the government campaign targeting cryptocurrency businesses continues despite Trump administration promises, with regulatory tools and personnel remaining unchanged at federal banking agencies.

Long challenges Vance’s premature victory declaration

Caitlin Long directly contradicted Vice President JD Vance’s morning speech declaring Operation Chokepoint 2.0 dead. She called his statement an exaggeration during her conversation with Wolf of All Streets. Long argues that while Vance meant well with his announcement, the reality remains that regulatory tools used to target the cryptocurrency industry stay in place across federal banking agencies.

Operation Chokepoint 2.0 refers to an informal campaign by U.S. federal banking regulators under the Biden administration to pressure banks into restricting services to digital asset companies. Unlike formal prohibitions, regulators used supervisory powers and informal guidance to encourage banks to deny services to crypto businesses.

The regulatory pressure primarily came from the FDIC, Federal Reserve, and Office of the Comptroller of the Currency, which advised banks to pause or terminate relationships with cryptocurrency businesses without issuing explicit bans. This approach allowed regulators to target the industry while maintaining plausible deniability about coordinated efforts.

Long emphasizes that Senator Lummis correctly identified that the people responsible for implementing these policies remain in their positions at federal banking agencies. Despite the Trump administration promises to support cryptocurrency, the actual personnel and regulatory mechanisms that created banking access problems for crypto companies have not been dismantled or replaced.

The Custodia CEO argues that declaring victory prematurely could create false confidence in the industry while the underlying systemic issues persist across the federal banking regulatory apparatus.

Career banking officials maintain power despite political leadership changes

Long explains how career staff within federal banking agencies are the ones with true power and who have weathered multiple political appointees over the course of their career. Some top leaders have held positions at these agencies for 30 to 40 years, accustomed to new political appointees every four years as they keep their position and power.

The CEO of Custodia learned this the hard way in her experience navigating legislation in Wyoming in 2018, where she observed seasoned career officials who had weathered seven or eight different supervisors during their careers. These are individuals who understand that political appointees are transitory but that they themselves are in positions of unparalleled authority in the regulatory process.

Trump has not yet installed his people in top positions, as Senate confirmation proceedings for the Office of the Comptroller of the Currency, the FDIC, and the Federal Reserve Vice Chair for Supervision have been slow. Even though there are nominees for two of these roles, they are waiting for Senate confirmation, hence causing delays in policy enactment.

Long observes that some of the most senior Federal Reserve personnel possess left-of-center views, and one of them often quotes philosophers like Rousseau in email signatures. Long calls some of the Fed personnel “Warrenites” after Elizabeth Warren’s anti-crypto stance.

The Federal Reserve asserts its independence from political influence, and the Supreme Court just reaffirmed that Fed governors are institutionally of a different status based on historical grounds. This independence makes it more difficult to remove anti-crypto career bureaucrats than to replace political appointees elsewhere in the agencies.

Custodia builds banking solutions while awaiting regulatory clarity

Custodia Bank partnered with Vantage Bank to create tokenized bank deposits that bypass current regulatory restrictions and also provide cross-border payment solutions. The partnership allows each bank to accomplish what the other cannot do independently, with Vantage providing Federal Reserve master account access and Custodia offering stablecoin technology capabilities.

The collaboration completed the first cross-border issuance of tokenized bank deposits for DX Express, a Mexican trucking company that moved U.S. dollars across borders in seconds with maximum transaction costs of $0.10.

This compares to traditional ACH or SWIFT transactions that typically require next-day processing, while the trucking company CEO wants to pay drivers within one hour of reaching destinations.

Long describes building a mesh network approach that connects multiple banks and stablecoin issuers through swap arrangements, creating interoperability rather than walled garden systems. The strategy targets traditional ACH payment flows that existing stablecoin issuers do not serve, focusing on businesses that require GAAP financial statement compliance.

Current stablecoins face adverse tax treatment requiring 1099 reporting for every transaction calculated to eight decimal places. This creates capital gains tax obligations that prevent traditional businesses from adoption.

Custodia’s tokenized bank deposits avoid these tax complications while providing blockchain technology benefits including fraud reduction, faster settlement, and lower costs. The company anticipates multi-billion dollar opportunities in serving regular banking business that cannot currently access blockchain technology due to accounting and tax restrictions.

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