Custodia Bank CEO Caitlin Long has leveled serious criticism at the U.S. Federal Reserve, accusing it of maintaining a hidden anti-crypto framework that gives a powerful advantage to big banks. According to Long’s detailed explanation on April 27, while the Fed publicly rescinded several restrictions imposed during the Biden administration’s crackdown on crypto, it quietly preserved the one policy that ensures large banks can dominate the stablecoin market through private blockchain projects.
Long identified the key surviving restrictions. Banks remain barred from directly holding cryptocurrencies, even for basic operational tasks like paying blockchain transaction fees. They are also prohibited from creating stablecoins on public, decentralized networks such as Ethereum. Meanwhile, private blockchains controlled by major banks are quietly encouraged, leaving smaller institutions and startups at a disadvantage.
This approach, Long warned, effectively locks smaller players out of both stablecoin issuance and crypto custody services. For instance, when banks provide crypto custody, fluctuating gas fees can cause transaction failures since current Fed rules prevent banks from covering fee overruns themselves. This makes offering reliable crypto services extremely challenging.
While the Fed’s April 24 announcement was celebrated in some circles as a victory for crypto adoption, Long said it was mainly a clever PR move that concealed the real story. She pointed out that the Fed’s press release listed all withdrawn guidance but omitted mention of the rules still in effect, misleading both the public and even senior figures in Washington.
Adding to the chorus of skepticism, Senator Cynthia Lummis warned that the Fed’s latest actions are merely cosmetic. Lummis emphasized that important restrictions like Section 9(13)—which classifies Bitcoin as “unsafe and unsound”—remain untouched. She pledged to continue fighting to hold the Fed accountable, arguing that many policymakers responsible for past anti-crypto efforts are still shaping policy today.
At the heart of Long’s argument is the belief that the Fed’s ultimate goal is to push stablecoin development into private, controlled environments run by large financial institutions. By favoring permissioned networks and discouraging open blockchain participation, the Fed risks stifling innovation, driving users toward DeFi platforms, and concentrating financial power even further.
Long’s critique highlights a growing rift between state-level crypto innovation hubs like Wyoming and the federal regulators still resisting broader adoption. Without meaningful change, she warned, the Fed’s hidden agenda could slow America’s progress in the evolving digital economy.
