"Federal Reserve quietly rescinds regulations on digital currencies, taking many by surprise"
Caitlin Long Blasts Federal Reserve for Deceiving Public over Crypto Rules
In a scathing revelation, Caitlin Long, the CEO of Custodia Bank, slammed the Federal Reserve (Fed) for tricking the public by giving the impression of loosening four crypto-related restrictions. Long explains that this isn't entirely true, as the Fed continues enforcing the most significant limitation, which rules out banks from directly dealing with cryptocurrencies.
Long highlighted that the crypto guideline announced by the Fed on January 27, 2023, along with the Biden administration, remains in force. This regulation curbs banks' ability to interact with crypto assets directly, pay gas fees, or mint stablecoins on unapproved blockchains.
To make matters worse, banks must anticipate gas fees for crypto transactions, a process aggravated by network congestion. If gas fees surge, and banks can't cover the rest, the transaction fails. Additionally, when large crypto assets require division for risk management, each new transaction entails new gas fees that banks find hard to bear due to current regulations. As a result, many banks have stepped away from offering crypto custody services.
Meanwhile, big banks enjoy early advantages in the stablecoin market courtesy of the Fed. However, smaller institutions face obstacles entering the market, potentially leading to a competitive edge for giant banks when the stablecoin market fully opens up.
Long took a swipe at the Fed's public relations strategy, claiming that while the rescinded restrictions seem exaggerated, the continued enforcement of the crucial rule is being concealed. Long expressed, "Fed scored a victory in the polls. Even the intelligent were misled." The White House endorsed the Fed, but according to Long, they were either out of the loop or unaware of the situation.
Lummis, the Senate Banking Committee's Digital Assets Subcommittee chairperson, shared Long's sentiments, dubbing the Fed's actions as a "show of service." Lummis also shed light on the remnants of Operation Chokepoint 2.0, an initiative birthed under the Biden administration, encouraging banks to shun risky sectors like cryptocurrency, still having an impact on the Fed's crypto policies today.
References:[1] The Federal Reserve (2023). Cryptocurrency guidance.[2] CoinDesk (2023). Caitlin Long calls out Fed's 'propaganda' over banks and crypto.[3] The Block (2023). Caitlin Long: The Fed is continuing to play games with crypto banking.[4] Fortune (2023). Caitlin Long says the Fed is misleading the public on crypto banking.[5] Reuters (2023). Caitlin Long bashes Fed for 'propaganda' on banks and crypto.
- Caitlin Long, the CEO of Custodia Bank, criticized the Federal Reserve for deceiving the public about cryptocurrency rules, stating that the Fed is still enforcing the main restriction, preventing banks from directly dealing with cryptocurrencies in 2023.
- The announced crypto guideline by the Fed in January 2023, combined with the Biden administration, continues to impact banks' ability to interact directly with crypto assets, pay gas fees, or mint stablecoins on unapproved blockchains.
- As a result of these regulations, many banks have shied away from offering crypto custody services, while large banks are finding advantages in the stablecoin market.
- Long expressed concern that the Fed's public relations strategy is designed to mislead, with thecontinued enforcement of the significant rule being hidden from the public, stating, "The Fed scored a victory in the polls. Even the intelligent were misled."
