Federal Reserve denies membership to crypto adjacent bank Custodia

Federal Reserve on January 27 rejected Application by Custodia Bank Inc. to become a member of the Federal Reserve System.

The move comes with increased regulatory oversight from the highest levels of the U.S. federal government following industry-wide scandals such as FTX and Genesis that wiped out billions of dollars of private and institutional money in 2022. It was done while

According to a press release, the board said, “Custodia’s risk management framework addresses concerns about the heightened risks associated with the proposed cryptocurrency activities, including its ability to mitigate the risks of money laundering and terrorist financing. It’s not enough to deal with it.”

Custodia is a licensed bank registered in the State of Wyoming and describes itself as “a bank formed to provide a compliant bridge between digital assets and the US dollar payment system, and a custodian of digital assets.” I’m here.

They are not regulated by the Federal Deposit Insurance Corporation (FDIC), but in 2019 the bank issued an application to obtain what is known as a Federal Reserve “master account” license. Other key features needed to clear cryptographic hurdles.

The move comes on a busy day for US federal agencies. Roadmap Partially addressed misinformation about crypto and the FDIC against cryptocurrency regulation by members of the Biden administration.

Custodia is surprised and disappointed by today’s board decision, said Caitlin Long, CEO of the company. Custodia provided a secure, federally regulated alternative to the reckless speculators and cryptocurrency scammers who have infiltrated the U.S. banking system, Long added. Custodia aggressively sought federal regulation beyond all requirements applicable to traditional banks. [] We will continue litigation. “