Fed denies Custodia Bank application to join the Federal Reserve System

The United State Federal Reserve Board has rejected Custodia Bank’s application to end up being a member of the Federal Reserve System. In its statement, the Fed stated that the application was “inconsistent with the necessary aspects under the law.” It also declared Custodia had an “inadequate” management structure and cited an earlier joint declaration by the Fed with the Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency that discovered crypto possessions to be at chances with sound banking practices.

STATEMENT FROM CUSTODIA BANK about today’s Federal Reserve action on its membership application. Its master account application stays pending: pic.twitter.com/QkMjcT508J!.?.!— Custodia Bank ™(@custodiabank)

January 27, 2023 In spite of the rejection, the bank’s application for a master account stays pending, the bank stated in a tweet. A so-called”master account”allows a bank to make global transfers and perform other important functions. Custodia, headed by Caitlin Long, made an application for the master account in 2020 and sued the Fed over the long hold-up in considering the application in June. The Fed provided the bank 72 hours to withdraw its application, Custodia said in a statement. It added,”Custodia actively looked for federal regulation, exceeding and beyond all requirements that apply to traditional banks.”Related: New York-based bank exits crypto after tumultuous year The Fed only provided standards for giving master accounts in August, when it ended up being clear that digital possession banks could have a hard time receiving an account.”Institutions that take part in novel activities and for which authorities are still developing suitable supervisory and regulatory frameworks would go through a more comprehensive evaluation, “the Fed said in a declaration at the time. BNY Mellon bank was

approved by the Fed to provide crypto custody services in October,

making it the first significant U.S. bank to use custody of digital properties and traditional investments on the very same platform. Custodia Bank was founded in Wyoming in 2020, making the most of the crypto-friendly state’s 2019 opt-in custody guidelines for”blockchain banks.”