- Caitlin Long criticizes the Federal Reserve for keeping one key anti-crypto restriction while revoking others, alleging it favors big banks.
- The remaining Fed guidance blocks banks from holding crypto as principal and issuing stablecoins on public blockchains.
- Long argues this gives large banks a head start with private stablecoins and hinders broader bank crypto services, urging legislative action.
The Federal Reserve has come under fire for its stance on cryptocurrency. Caitlin Long, the CEO of Custodia Bank, claims that the Fed had kept one key restriction in place, despite revoking four other pieces of anti-crypto guidance. Such selective bias has significantly impacted banks’ ability to engage with the crypto industry.
The one restriction in question was allegedly mandated during the Biden White House in January 2023, which she alleges strategically benefits large banks. As per the top exec, one of the crucial aspects of the guidance involved blocking banks from principal crypto activities. This clause restricts banks from directly holding or transacting in cryptoassets, even in small amounts needed for transaction fees (gas).
Secondly, banks are blocked from issuing stablecoins on public, permissionless blockchains such as Ethereum. Long claims that the Federal Reserve prefers policy favoring private, permissioned blockchains over public, permissionless ones. This is in contrast to the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC), which have reportedly rescinded this preference.
How the Federal Reserve’s Move Benefits Large Banks Before Potential Law Change
By doing this, the Fed is empowering large banks to develop their own private stablecoins. While this advantage might be nullified if the federal stablecoin bill passes, Long believes it still gives big banks an unfair advantage until then.
When the #stablecoin bill becomes law, the Fed’s preference for permissioned blockchains will be overturned. So Congress should hurry up! because in the meantime, the Fed just gave the big banks’ private stablecoins a head start before the stablecoin market really opens up.
Considering all these, the FED’s omitting any mention of the crucial January 2023 guidance while announcing the rescission of four guidelines is seen as misleading. It hinders banks from offering broader crypto services like custody. In light of this, Long calls for public awareness and legislative action to counter this perceived regulatory bias.
Read more: Federal Reserve Eases Crypto Restrictions, Boosts Bitcoin Adoption