Fed’s Stablecoin Hypocrisy Exposed: Custodia CEO Accuses Central Bank of Rigging Game for Wall Street

Another day, another regulatory double standard—Custodia’s CEO just dropped the hammer on the Fed’s ’do as I say, not as I do’ stablecoin policy.

The big banks get a free pass

While fintechs and crypto natives jump through regulatory hoops, legacy institutions waltz into stablecoins with Fed blessings. Guess some animals are more equal than others.

The crypto industry fires back

This isn’t just about fairness—it’s about the Fed protecting its banking cartel. Decentralized finance doesn’t need permission, but apparently old money still gets VIP treatment.

Wake up call: when the rules change depending on who’s playing, it’s not regulation—it’s protectionism. The free market always finds a way... usually while laughing at bureaucrats.

Fed’s crypto policy

In a detailed post on social media, Long argued that although the Fed rolled back four pieces of guidance, it deliberately kept a critical policy intact. The policy prohibits banks from holding cryptocurrencies for their own accounts, even to cover small blockchain transaction fees.

It also bars banks from issuing stablecoins on public blockchains like Ethereum (ETH), instead favoring permissioned, private networks typically operated by large financial institutions.

Long said:

“The Fed definitely won on PR spin.”

She added that the central bank’s April 24 announcement listed every piece of guidance it rescinded but made no mention of the rule it left untouched. She further explained that the remaining policy severely limits banks’ ability to offer crypto custody services.

Under current rules, banks are unable to pay fluctuating gas fees out of pocket when processing on-chain transactions, a technical barrier that undermines their ability to serve digital asset clients efficiently.

Private blockchains and regulatory control

Long’s criticism comes amid growing concerns that the Fed is promoting private blockchain solutions controlled by major banks, while slowing the adoption of decentralized, public blockchain networks.

She warned that this strategy could entrench big-bank dominance over emerging stablecoin markets, giving them a head start while other institutions await new federal stablecoin legislation.

Meanwhile, Senator Cynthia Lummis recently echoed Long’s concerns and criticized the Fed’s latest rollback as “just lip service.”

Lummis argued that the central bank continues to wield “reputational risk” warnings to restrict banks from engaging with Bitcoin and other digital assets, labeling them “unsafe and unsound.”She vowed to continue holding Fed Chair Jerome Powell accountable, warning that many architects of past crackdowns still influence policy today.

Despite President Donald Trump’s administration making efforts toward a broader push for a more crypto-friendly environment, Long and Lummis contend that federal regulators remain resistant to full-scale blockchain innovation.