US Fed Board Rejects Crypto Bank Custodia's Re-Application to Open a Master Account

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Federal Reserve Board (Fed) voted unanimously to deny Custodia Bank's request to reconsider last month's decision on the bank's application.

In the comments to the decision adopted by the CouncilIt said Custodia's application, as resubmitted to the regulator, did not comply with legal requirements.

In the text of the official letter of refusalThe Fed administration said Custodia's business model "poses significant risks to safety and soundness" and that the bank "has not provided sufficient evidence of the effectiveness of its risk management system."

The main reason why Custodia applicationsmay continue to be rejected by the Fed, is due to the regulator’s intention to put crypto banks on an equal footing with traditional banks insured by the Federal Deposit Insurance Agency (FDIC). Specifically, extend restrictions on the supply of crypto assets and access to “new and untested cryptographic transactions, including the issuance of crypto assets on open, public and/or decentralized networks” to uninsured banks.

In mid-February the CEOCustodia Bank Caitlin Long said the crypto bank will go to court to continue its fight to become a full member of the Federal Reserve System.