Caitlin Long Condemns Fed’s Stablecoin Bias: Big Banks Favored?
Caitlin Long, CEO of Custodia Bank, has sharply criticized the Federal Reserve for its seemingly pro-big-bank stablecoin policy. Despite recent easing of crypto guidelines for banks, a key anti-crypto stance remains, Long argues, effectively favoring large financial institutions.
In a recent X thread, Long highlighted that while the Fed rescinded several prior crypto guidelines, a January 2023 statement, issued in conjunction with the Biden administration, remains in effect. This statement, she explains, prevents banks from directly engaging with crypto assets and prohibits the issuance of stablecoins on permissionless blockchains.
Long contends that this creates an unfair advantage for established banks to develop private stablecoins, leaving the broader market in a holding pattern while Congress debates stablecoin legislation. “The Fed has maintained a regulatory preference for permissioned stablecoins (i.e., big-bank versions),” Long stated emphatically.
Legislative Action Urged
Long urges Congress to swiftly pass a stablecoin bill, believing it would supersede the Fed’s current policy. Beyond stablecoins, she points out that the Fed’s restrictions also impede banks from actively participating in cryptocurrency markets, hindering market-making activities in assets like Bitcoin (BTC), Ether (ETH), and Solana (SOL).
Operational challenges for banks providing crypto custody services are also highlighted, particularly concerning transaction fees—a standard practice in the crypto industry but restricted under the Fed’s guidelines.
Long summarizes the situation as the Fed creating obstacles for banks entering the crypto custody space while simultaneously promoting permissioned stablecoins issued by major banks. She accuses the Fed of misleading the public by highlighting the rescinded guidelines and omitting mention of the persistent restrictions.
Senator Cynthia Lummis echoed these concerns, calling the Fed’s actions “lip service” and hinting at potential legislative countermeasures. She cited a specific section of the Fed’s policy statement labeling Bitcoin and digital assets as “unsafe and unsound.”
However, not all industry figures share this negative view; some see the Fed’s moves as a positive step. The contrasting opinions highlight the complexities and diverse interpretations within the cryptocurrency community.