The US Federal Reserve has come under fire from Custodia Bank CEO Caitlin Long for allegedly maintaining anti-crypto policies that benefit large banks at the expense of innovation in the digital asset space. Despite recent moves to rescind certain restrictive crypto policies, the Fed has kept in place a key rule from January 2023 that prevents banks from directly engaging with cryptocurrencies.
In a detailed social media post, Long highlighted the Fed’s decision to roll back four pieces of guidance while retaining a policy that prohibits banks from holding cryptocurrencies for their own accounts. This rule also prevents banks from issuing stablecoins on public blockchains like Ethereum, favoring permissioned, private networks controlled by major financial institutions.
Long expressed concerns that the Fed’s approach could give big banks an unfair advantage in the emerging stablecoin market, stifling competition and hindering innovation on public blockchain networks. Senator Cynthia Lummis echoed these sentiments, criticizing the Fed’s actions as mere “lip service” and calling for greater accountability from Fed Chair Jerome Powell.
Despite some efforts towards creating a more crypto-friendly regulatory environment under the Trump administration, Long and Lummis believe that federal regulators are still resistant to embracing full-scale blockchain innovation. They argue that the Fed’s continued caution around digital assets poses a barrier to progress in the crypto space.
As debates around crypto regulation continue, it remains to be seen how the Fed will navigate the delicate balance between promoting financial stability and fostering technological innovation in the digital asset ecosystem. The crypto community will be closely monitoring these developments as they unfold.