Custodia Financial institution CEO Caitlin Lengthy 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 a number of restrictive crypto insurance policies final week whereas holding in place a key rule from January 2023 that blocks banks from straight partaking with crypto.
She warned that the transfer would create an unfair benefit for main banks looking for to challenge 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 steering, it intentionally stored a essential 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 a substitute favoring permissioned, personal networks sometimes operated by giant monetary establishments.
Lengthy stated:
“The Fed positively gained on PR spin.”
She added that the central financial institution’s April 24 announcement listed every bit of steering it rescinded however made no point out of the rule it left untouched.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’ capability to supply crypto custody providers.
Beneath present guidelines, banks are unable to pay fluctuating gasoline charges out of pocket when processing on-chain transactions, a technical barrier that undermines their capability to serve digital asset purchasers effectively.
Personal 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 not too long ago echoed Lengthy’s considerations and criticized the Fed’s newest rollback as “simply lip service.”
Lummis argued that the central financial institution continues to wield “reputational danger” warnings to limit banks from partaking 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 right now.
Regardless of President Donald Trump’s administration making efforts towards a broader push for a extra crypto-friendly setting, Lengthy and Lummis contend that federal regulators stay proof against full-scale blockchain innovation.