A recent analysis by author [Long’s name] highlights the Federal Reserve’s (Fed) selective enforcement of anti-crypto regulations as hindering innovation and potentially giving large banks an unfair advantage. While several regulatory initiatives targeting crypto have been rescinded, the Fed continues to maintain a restrictive stance on bank involvement in the crypto space. This includes: prohibiting banks from handling even small amounts of crypto assets for fees or transactions; barring them from issuing stablecoins on decentralized blockchains. Notably, the Fed favors permissioned stablecoins over their permissionless counterparts, a stance distinct from other federal banking agencies like the OCC and FDIC.
Long argues that this regulatory bias ultimately supports the development of controlled, centralized stablecoins while hindering broader, decentralized innovation in the crypto space.
The author further explores how these policies pose significant challenges for banks’ entry into the cryptocurrency custody market. The Fed’s restrictions limit their ability to transact and manage risk due to fluctuating on-chain fees and complex transaction structures. This effectively prevents them from becoming full-fledged custodians of major cryptocurrencies like Bitcoin, Ethereum, and Solana.
Long emphasizes that these regulations create a significant structural advantage for large banks seeking to launch permissioned stablecoins.
Until Congress acts on the pending legislation, big banks are poised to dominate this burgeoning market.