The Federal Reserve deceived everyone by revoking anti-cryptography rules.

Caitlin Long, CEO of Custodia Bank, said the Federal Reserve has fooled the public by pretending to relax Crypto rules, but in fact it lives on its most important anti-crypto restrictions.

Caitlin posted a detailed thread on X Sunday, explaining that the Fed had fussed about discarding four anti-crypto guidance, but that one major piece has been placed.

This surviving policy was issued along with Biden White House anti-crypto, she said. statement Back on January 27, 2023, the bank is blocking it from touching crypto in a real way.

Caitlin said the untouched guidance does three main things: First, it blocks the bank from keeping cryptographic procedures as principal. This means you can’t even pay a small gas fee. Second, stop banks from issuing stubcoins on unauthorized blockchains.

Third, they clearly prefer permitted blockchains (blockchains controlled by large banks), despite the OCC and FDIC having removed the idea. “The Fed maintains regulatory priority over permitted stablecoins,” Caitlin said.

The Fed supports big banks while suppressing custody of crypto

Caitlin said the bank’s refusal to address crypto directly has greater consequences than most people realize. Not only does it block Wall Street Bank from creating a market with major tokens such as BTC, ETH, and SOL, but it also ruins banks that try to provide crypto custody.

Caitlin explained that code custodians usually need to estimate their gas prices in advance. If the estimate is too low due to a sudden increase in network fees, the transaction will fail. In the current setup, banks acting as custodians are unable to pay the missing amount, which leads to the transaction being killed.

This problem is even more troubling as custodians often split large crypto holdings into smaller pieces to better manage risk. All splits mean new on-chain transactions and more gas fees.

Caitlin said that banks cannot pay these fees directly, which puts the entire process at risk and discourages them from providing crypto custody services. In short, the Fed has thrown sand into gear for banks that want to work with code and seriously.

Caitlin summed it up by effectively passing the Fed’s head start in launching permitted stubcoins to the Big Banks, making it even more difficult for others to catch up once the Stablecoin market opens up. She added that the operation is currently giving the Wall Street Giants an advantage before Congress passed the Stubcoin Act, which would remove the Fed’s preference for permitted systems.

FRD hides real actions while the White House cheers

Caitlyn criticized the Fed’s public relations stunts. She said the Fed did a big deal about all the rules it rolled back, but didn’t mention any important rules it held. “The Fed definitely won with the PR spin,” she wrote, adding that even the clever people were fooled. She warned that now that people know the truth, they should be furious.

She said the White House praised the Fed’s actions and praised them for clearly not realizing or pretending that the worst policies remained. Caitlin said this raises questions about what the White House expects from the Fed, what the Fed has promised, and how the relationship between the two will change. She said most media outlets are talking about the brewing battle over interest rates, but few people have covered the growing tensions over banking regulations.

Cynthia Ramis, head of the Senate Banking Committee’s Digital Assets Subcommittee, was not fooled. She called the Fed’s move “lip service” and made it clear that she had not purchased the act. Cynthia, who has serious power over digital asset rules in the Senate, was able to take steps to fix what she called “deceived manipulation.”

In her own post about X, Cynthia added, “Unlike the OCC and FDIC, the Fed uses reputational risks in bank supervision.” She also said the same Fed staff who pushed Operation Chalk Point 2.0, an infamous Biden-era effort to keep banks away from the controversial industry, still handles crypto policy today.