Custodia Bank CEO Caitlin Long accused the US Federal Reserve of quietly sustaining anti-crypto insurance policies that favor giant banks whereas presenting an look of regulatory easing.
Lengthy criticized the Fed for rescinding several restrictive crypto policies final week whereas holding in place a key rule from January 2023 that blocks banks from straight participating with crypto.
She warned that the transfer would create an unfair benefit for main banks looking for to problem non-public stablecoins whereas stifling innovation on non-public networks.
Fed’s crypto coverage
In an in depth publish on social media, Lengthy argued that though the Fed rolled again 4 items of steering, it intentionally stored a crucial 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, non-public networks sometimes operated by giant monetary establishments.
Lengthy stated:
“The Fed positively received on PR spin.”
She added that the central financial institution’s April 24 announcement listed each piece of steering it rescinded however made no point out of the rule it left untouched. She additional defined that the remaining coverage severely limits banks’ capacity to supply crypto custody providers.
Underneath present guidelines, banks are unable to pay fluctuating fuel charges out of pocket when processing on-chain transactions, a technical barrier that undermines their capacity to serve digital asset shoppers effectively.
Personal blockchains and regulatory management
Lengthy’s criticism comes amid rising issues that the Fed is selling non-public blockchain options managed by main banks, whereas slowing the adoption of decentralized, public blockchain networks.
She warned that this technique may 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 lately echoed Lengthy’s issues 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 property, 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 the moment.
Regardless of President Donald Trump’s administration making efforts towards a broader push for a extra crypto-friendly surroundings, Lengthy and Lummis contend that federal regulators stay immune to full-scale blockchain innovation.