Source: Cointelegraph
Original: “Custodia Bank Founder Criticizes Federal Reserve's Stablecoin Policy Favoring 'Big Banks'”
Caitlin Long, founder and CEO of Custodia Bank, criticized the Federal Reserve's actions. She pointed out that although the Federal Reserve has relaxed the rules for banks' cryptocurrency collaborations, it still secretly maintains an anti-cryptocurrency policy that favors stablecoin issuance by big banks.
Long explained in a post on the X platform on April 27 that while the Federal Reserve recently revoked four previous cryptocurrency guidelines, it still retains the statement released in coordination with the Biden administration on January 27, 2023.
According to Long, the guidelines prohibit banks from directly participating in cryptocurrency asset businesses and do not allow them to issue stablecoins on unlicensed blockchains.
"The Federal Reserve has been maintaining a regulatory preference for licensed stablecoins (i.e., big bank versions)," Long stated.
She warned that while the broader market awaits Congress to pass stablecoin legislation, this move gives traditional financial institutions a "first-mover advantage" in issuing private stablecoins.
Long stated that once the federal stablecoin bill becomes law, it could overturn the Federal Reserve's position. "Congress should act quickly," she urged.
In addition to stablecoins, Long pointed out that the Federal Reserve's policies hinder banks from entering the cryptocurrency market as major players, preventing them from providing market-making services for assets like Bitcoin (BTC), Ethereum (ETH), or Solana (SOL).
She also mentioned that banks face operational challenges when providing cryptocurrency custody services, particularly regarding gas fees for transactions on the payment chain—standard practice for cryptocurrency custodians but restricted under current Federal Reserve rules.
Summarizing her concerns, Long believes that the Federal Reserve's decision continues to obstruct banks from entering the crypto custody business while promoting licensed stablecoins supported by large financial institutions.
"The Federal Reserve has indeed achieved a victory in public relations—its press release lists a long string of revoked guidelines but completely fails to mention the guidelines that are still retained. This understandably misleads many smart people," she wrote.
Wyoming Senator Cynthia Lummis also joined the criticism. As a strong supporter of digital assets, Senator Lummis condemned the Federal Reserve's actions as merely "lip service," suggesting that there may be legislative pushback in the future.
Lummis noted that the Federal Reserve still views Bitcoin and digital assets as "unsafe and unsound" in its policy statement 9(13), a clause that has yet to be revoked.
However, other executives in the cryptocurrency industry have a positive attitude towards the Federal Reserve's announcement. Michael Saylor of Strategy stated on the X platform on April 25 that the Federal Reserve's actions mean "banks can now freely start supporting Bitcoin."
Related: Senator Lummis: Federal Reserve's Withdrawal of Cryptocurrency Bank Regulation Rules is "Not Real Progress"
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