Custodia CEO Criticizes Fed’s Stablecoin Policy

Custodia CEO Criticizes Fed’s Stablecoin Policy

Caitlin Long, CEO of Custodia Bank, criticized Federal Reserve policy on April 28, 2025, stating it favors large banks over crypto firms by restricting stablecoins on open networks.

The Fed’s decision to maintain its policy on stablecoins limits innovation and provides regulatory advantages to established financial institutions, potentially stifling broader crypto market participation.

Custodia Bank CEO Caitlin Long has scrutinized the Federal Reserve’s policy regarding stablecoins, accusing it of favoring major banks . The Fed prohibits issuing stablecoins on open networks like Ethereum and Bitcoin , favoring permissioned blockchain stablecoins . Long has been a vocal advocate for clear crypto regulation and continues to challenge regulatory policies that she perceives as biased. The restrictive Fed policy remains a significant obstacle for fintechs like Custodia, impeding their access to Federal Reserve payment systems.

This policy is particularly relevant as it creates an uneven playing field, benefitting large banks capable of utilizing permissioned blockchains for stablecoin issuance. In contrast, other financial bodies, such as the OCC and FDIC, have rolled back prior restrictions, leading to a regulatory discrepancy.

“The Fed continues to favor stablecoins from major players, giving them an early advantage before the new stablecoin laws take effect.” — Caitlin Long, CEO, Custodia Bank

The crypto community exhibits frustration over the selective enforcement, with many echoing Long’s call for transparent and inclusive policy-making. The policy’s impact is not immediate in terms of liquidity or TVL changes but has significant long-term implications for infrastructure development on mainstream blockchains like Ethereum and Bitcoin. Key financial outcomes depend heavily on Fed regulatory alignment, which, if extended, could indicate further consolidation of power among the largest financial institutions. Historical trends echo that focused regulatory preferences have often slowed industry innovation.