What happened?
The US Federal Reserve has maintained a key policy preventing banks from directly engaging with cryptocurrencies, despite rescinding several other restrictions. Caitlin Long, CEO of Custodia Bank, accuses the Fed of feigning support for crypto while favoring large banks. This policy restricts banks from holding cryptocurrencies and creating stablecoins on public blockchains.
Who does this affect?
This affects banks, cryptocurrency businesses, and innovators in the fintech space. Large banks benefit as they can continue to dominate through private blockchains, while smaller banks and crypto startups struggle with constraints on crypto custody services. Consumers and businesses seeking innovative financial solutions are also indirectly impacted by limited access to crypto services.
Why does this matter?
The Fed’s stance could stifle competition and innovation in the blockchain and cryptocurrency markets by favoring traditional financial institutions. This restriction might push investors and users toward decentralized finance (DeFi) platforms, potentially accelerating crypto adoption outside the traditional banking system. The market may see increased tension between federal regulations and state-level initiatives supporting crypto-friendly policies.