Federal Reserve Deceptively Maintains Anti-Crypto Restrictions, CEO of Custodia Bank Reveals
Caitlin Long, the CEO of Custodia Bank, has exposed the Federal Reserve for misleading the public by appearing to relax crypto regulations while actually keeping a crucial anti-crypto restriction in place.
Caitlin took to X Sunday to outline how the Fed created a facade of abolishing four pieces of anti-crypto guidance while retaining a pivotal policy that prohibits banks from engaging with cryptocurrencies in a meaningful manner.
Key Anti-Crypto Measures Still in Effect
Caitlin highlighted the three main aspects of the untouched guidance that hinder banks from fully embracing crypto activities. Firstly, banks are prohibited from holding cryptoassets as principal, even for minor transactions like paying gas fees. Secondly, banks are restricted from issuing stablecoins on permissionless blockchains.
Furthermore, the Fed continues to exhibit a preference for permissioned blockchains controlled by major banks, despite the OCC and FDIC abandoning this approach. Caitlin cautioned that this regulatory bias towards permissioned stablecoins could grant big banks a competitive advantage in launching private stablecoins before broader legislation on stablecoins is enacted.
Impact on Crypto Custody Services
Caitlin emphasized the broader implications of the Fed’s reluctance to allow banks direct involvement in crypto, particularly in terms of custody services. This restriction not only prevents Wall Street banks from participating in major token markets like BTC, ETH, and SOL but also hampers their ability to offer crypto custody solutions.
She explained that crypto custodians rely on estimating gas fees in advance, and the inability to adjust fees in real-time poses significant challenges. This limitation complicates the process of managing large crypto holdings and conducting multiple on-chain transactions, ultimately dissuading banks from providing custody services for cryptocurrencies.
Unveiling the Fed’s Deceptive Tactics
Caitlin criticized the Fed’s deceptive tactics in highlighting regulatory rollbacks while concealing crucial restrictions. She called out the Fed for its PR spin and urged the public to be outraged upon learning the truth.
She also questioned the White House’s endorsement of the Fed’s actions, suggesting a lack of awareness or transparency regarding the retained anti-crypto policy. Cynthia Lummis, head of the Senate Banking Committee’s Digital Assets Subcommittee, echoed Caitlin’s sentiments, labeling the Fed’s move as mere “lip service” and hinting at potential corrective measures.
Cynthia emphasized the continued reliance on reputation risk in bank supervision by the Fed and raised concerns over the regulatory stance on digital assets. She highlighted the persistent influence of Fed staffers involved in past controversial initiatives, signaling ongoing tensions in bank regulation.