The debate around how traditional finance should interact with the growing digital asset sector is intensifying, with Caitlin Long from Custodia Bank voicing strong criticism of the Fed's stablecoin policy.
What Custodia Bank's CEO Says About the Fed
Caitlin Long, founder and CEO of Custodia Bank, expressed concerns about the Fed's recent policy. She noted that while the Fed rescinded four previous prohibitive letters regarding crypto operations for banks, the core issue remains unresolved. The Fed does not allow banks to directly hold crypto assets or issue stablecoins on public blockchains like Ethereum or Bitcoin, creating an uneven playing field.
Fed's Stance on Stablecoin Policy
The Fed cites concerns over safety and systemic risk as reasons for its cautious approach. The January 2023 statement outlined risks associated with crypto assets, including liquidity and credit risks. Critics, including Long, argue that this broad policy fails to account for the distinctions between different types of crypto assets.
Impact of Policy on Crypto Regulation and Banks
The Fed's stance significantly affects innovation in banking. Restrictions on banks engaging with permissioned blockchains limit their ability to develop digital asset services, creating an uneven competitive landscape. Smaller banks face substantial hurdles, while larger banks may find ways to bypass these restrictions.
The ongoing debate over the Fed's stablecoin policy and Caitlin Long's perspective reflects a crucial juncture for the development of the crypto industry in the US. Regulatory clarity could pave the way for innovation.
