Custodia Bank CEO Caitlin Long accused the US Federal Reserve of quietly sustaining anti-crypto insurance policies that favor massive banks whereas presenting an look of regulatory easing.
Lengthy criticized the Fed for rescinding several restrictive crypto policies final week whereas retaining in place a key rule from January 2023 that blocks banks from instantly participating with crypto.
She warned that the transfer would create an unfair benefit for main banks looking for to subject personal stablecoins whereas stifling innovation on personal networks.
Fed’s crypto coverage
In an in depth publish on social media, Lengthy argued that though the Fed rolled again 4 items of steerage, it intentionally saved a vital coverage intact. The coverage prohibits banks from holding cryptocurrencies for their very own accounts, even to cowl small blockchain transaction charges.
It additionally bars banks from issuing stablecoins on public blockchains like Ethereum (ETH), as an alternative favoring permissioned, personal networks sometimes operated by massive monetary establishments.
Lengthy stated:
“The Fed undoubtedly gained on PR spin.”
She added that the central financial institution’s April 24 announcement listed every bit of steerage it rescinded however made no point out of the rule it left untouched. She additional defined that the remaining coverage severely limits banks’ skill to supply crypto custody providers.
Beneath present guidelines, banks are unable to pay fluctuating fuel charges out of pocket when processing on-chain transactions, a technical barrier that undermines their skill to serve digital asset shoppers effectively.
Non-public blockchains and regulatory management
Lengthy’s criticism comes amid rising considerations that the Fed is selling personal blockchain options managed by main banks, whereas slowing the adoption of decentralized, public blockchain networks.
She warned that this technique might entrench big-bank dominance over rising stablecoin markets, giving them a head begin whereas different establishments await new federal stablecoin laws.
In the meantime, Senator Cynthia Lummis just lately echoed Lengthy’s considerations and criticized the Fed’s newest rollback as “just lip service.”
Lummis argued that the central financial institution continues to wield “reputational danger” warnings to limit banks from participating with Bitcoin and different digital belongings, labeling them “unsafe and unsound.”She vowed to proceed holding Fed Chair Jerome Powell accountable, warning that many architects of previous crackdowns nonetheless affect coverage at this time.
Regardless of President Donald Trump’s administration making efforts towards a broader push for a extra crypto-friendly atmosphere, Lengthy and Lummis contend that federal regulators stay proof against full-scale blockchain innovation.
