At a time when regulators are scrutinizing the crypto industry like never before, digital asset bank Custodia hopes the US government will accept the most aligned business strategy. However, the central bank saw it differently, and rejected the Wyoming-based bank’s application to become a member of the Federal Reserve System.
“The company’s novel business model and proposed focus on crypto assets present significant safety and health risks,” the Federal Reserve said in a press release.
Caitlin Long, CEO and co-founder of Custodia, rejected the Fed’s decision and asserted the validity of the application. “Custodia offers a safe, federally regulated, solvent alternative to reckless speculators and crypto grifters who penetrate the US banking system,” he said in a statement posted to Twitter.
Membership in the Federal Reserve System allows state-chartered banks access to tax benefits, investment opportunities, and other benefits. But what may be more important for Custodia is the potential to win a lot of public relations, the opportunity to show the improvement of cryptocurrency at the highest level of government.
The rejection of Custodia is another example of the federal government’s increasingly strict approach to crypto in the past few months, as the SEC and DOJ have launched a primetime investigation into the now bankrupt cryptocurrency exchange FTX, and Congress has considered cryptocurrency regulation as hot. – button problem
And Long, a Wall Street veteran who has helped pass 24 crypto-friendly laws in Wyoming by 2021, is not deterred by the Fed’s decision. “The Board’s rejection is unfortunate, but consistent with Custodia’s concerns raised about the Federal Reserve’s handling of applications, an issue that will continue to be addressed,” he said in a statement.
Long’s comments refer to the lawsuit brought by Custodia against the central bank because of the Fed’s delay in deciding on Custodia’s application for the master account-the main permit that allows banks to transfer funds with each other and the Fed immediately agreed rates. In the complaint, Custodia asked a federal judge not only to process the application but to issue an appropriate decision. Long’s comments suggest that the company will litigate the merits of this week’s decision by the Fed.
Despite rejecting Custodia’s application, the Fed said in the accompanying press release that it is open to membership for banks that have crypto assets if the safekeeping service “is performed in a safe and sound manner and in compliance with consumer, anti-money laundering and anti-terrorist financing laws.” .
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