Caitlin Long Criticizes the Federal Reserve for Favoring Big Bank Stablecoins, Calls on Congress to Accelerate Stablecoin Legislation

Caitlin Long, founder and CEO of Custodia Bank, criticized the U.S. Federal Reserve for quietly maintaining an anti-crypto policy that favors stablecoins issued by large banks, despite the Fed relaxing rules on bank collaboration with cryptocurrencies. Long pointed out that the Fed withdrew four cryptocurrency guidelines but retained the statement issued on January 27, 2023, in coordination with the Biden administration. This statement prevents banks from directly participating in crypto assets and prohibits them from issuing stablecoins on permissionless blockchains. She warned that this gives traditional financial institutions an advantage in launching private stablecoins while the market awaits stablecoin legislation from Congress. Long called on Congress to accelerate the legislative process and noted that the Fed's policy restricts banks from acting as principals in the crypto market, hindering their market-making activities in assets like Bitcoin, Ethereum, and Solana. Additionally, banks face operational challenges when providing crypto custody services, especially concerning gas fees for transactions on payment chains. Senator Cynthia Lummis also criticized the Fed’s actions as mere "lip service," emphasizing that Bitcoin and digital assets are viewed as "unsafe and unsound." However, some crypto industry executives welcomed the Fed's announcement, seeing it as a positive development for the industry.