{"id":17049,"date":"2023-01-29T11:31:58","date_gmt":"2023-01-29T11:31:58","guid":{"rendered":"https:\/\/crowdfundjunction.com\/blog\/crypto-bank-custodia-denied-membership-in-us-federal-reserve-system-finance-bitcoin-news\/"},"modified":"2023-01-29T11:31:58","modified_gmt":"2023-01-29T11:31:58","slug":"crypto-bank-custodia-denied-membership-in-us-federal-reserve-system-finance-bitcoin-news","status":"publish","type":"post","link":"https:\/\/crowdfundjunction.com\/blog\/crypto-bank-custodia-denied-membership-in-us-federal-reserve-system-finance-bitcoin-news\/","title":{"rendered":"Crypto Bank Custodia Denied Membership in US Federal Reserve System \u2013 Finance Bitcoin News"},"content":{"rendered":"

(Originally posted on : Bitcoin News )<\/b>
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The U.S. Federal Reserve Board has rejected the attempt of Custodia Bank to become member of the Federal Reserve System. According to the decision announced Friday, the application submitted by the digital asset bank is inconsistent with legal requirements. <\/strong><\/p>\n

Federal Reserve Board Says Business Model Proposed by Custodia Bank Presents Risks<\/h2>\n

Crypto bank Custodia has been denied membership in the United States Federal Reserve System. In an announcement dated Jan. 27, the Federal Reserve Board explained that the application, as submitted by the company, is \u201cinconsistent with the required factors under the law.\u201d<\/p>\n

The press release further detailed that Custodia is a special purpose depository institution which does not have federal deposit insurance and wants to engage in \u201cuntested crypto activities,\u201d including issuing a crypto asset. In that context, the Board argued:<\/p>\n

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The firm\u2019s novel business model and proposed focus on crypto-assets presented significant safety and soundness risks.<\/p>\n<\/blockquote>\n

The Federal Reserve Board reminded it had previously determined that \u201csuch crypto activities are highly likely to be inconsistent with safe and sound banking practices.\u201d It also said the bank\u2019s risk management framework, \u201cincluding its ability to mitigate money laundering and terrorism financing risks,\u201d was not sufficient to address relevant concerns.<\/p>\n

\u201cIn light of these and other concerns, the firm\u2019s application as submitted was inconsistent with the factors the Board is required to evaluate by law,\u201d the body concluded in the statement, adding that the order will be released following a review for confidential information.<\/p>\n

Membership in the Federal Reserve System would have given Custodia, a bank chartered by the state of Wyoming, certain benefits, in terms of taxation and investment, for example. In a tweeted statement<\/a>, CEO Caitlin Long said the company was \u201csurprised and disappointed\u201d by the Board\u2019s move, insisting:<\/p>\n

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Custodia offered a safe, federally-regulated, solvent alternative to the reckless speculators and grifters of crypto that penetrated the U.S. banking system, with disastrous results for some banks.<\/p>\n<\/blockquote>\n

Long emphasized that Custodia actively sought federal regulation, \u201cgoing above and beyond all requirements that apply to traditional banks.\u201d She also noted that the denial is consistent with the concerns raised by the company about the Fed\u2019s handling of its applications and vowed that the bank will continue to litigate the issue.<\/p>\n

The executive was referring to a lawsuit filed by Custodia against the central bank system\u2019s delayed ruling on its application for a master account. The latter remains pending, as the company pointed out on Twitter. Banks hold most of their reserves in master accounts at the Fed which allows them to make transfers between each other and settle payments.<\/p>\n

Also on Friday, the Federal Reserve Board issued a policy statement, according to which both insured and uninsured banking institutions will be subjected to limits<\/a> on certain activities, including those associated with crypto assets.<\/p>\n

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application<\/a>, Bank<\/a>, banks<\/a>, board<\/a>, Central Bank<\/a>, Crypto<\/a>, crypto assets<\/a>, Cryptocurrencies<\/a>, Cryptocurrency<\/a>, Custodia<\/a>, denial<\/a>, Fed<\/a>, Federal Reserve<\/a>, Federal Reserve Board<\/a>, master account<\/a>, Member<\/a>, Membership<\/a>, U.S.<\/a>, US<\/a><\/div>\n<\/div>\n

Do you think the U.S. Federal Reserve Board will change its stance in the future regarding applications like the one filed by Custodia Bank? Share your expectations in the comments section below. <\/strong><\/em><\/p>\n

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\nLubomir Tassev <\/h6>\n

\nLubomir Tassev is a journalist from tech-savvy Eastern Europe who likes Hitchens\u2019s quote: \u201cBeing a writer is what I am, rather than what I do.\u201d Besides crypto, blockchain and fintech, international politics and economics are two other sources of inspiration.

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Image Credits<\/b>: Shutterstock, Pixabay, Wiki Commons, rarrarorro \/ Shutterstock.com<\/em><\/p>\n

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Disclaimer<\/strong>: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com<\/a> does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.<\/p>\n<\/div>\n

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