Key Points:
After the rejection, Custodia will not be able to access the Federal Reserve Payments System. The Fed believes that the application submitted by the company does not meet the requirements required by law. Experts say Custodia’s failure will disappoint the crypto industry.
Custodia is a special purpose depository institution chartered by the state of Wyoming with no federal deposit insurance. The company proposes to engage in novel and untested crypto activities, including issuing crypto assets on open, public, and/or decentralized networks. The company’s novel business model and proposed focus on cryptoassets pose significant safety and sound risks.
The Federal Reserve has previously made it clear that such cryptographic activities are highly likely to be inconsistent with safe and sound banking practices. The Fed also found that Custodia’s risk management framework was insufficient to address concerns about increased risks associated with its proposed crypto activities, including its ability to mitigate money laundering and terrorist financing risks.
Previously, the US Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency said they were closely observing the cryptocurrency operations of banking institutions.
The regulators highlighted a few red flags for those wishing to go deeper into crypto-related activities, even if the statement noted that banks aren’t forbidden from doing business with organizations that operate within the law.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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Coincu News
George Town, Grand Cayman, 22nd November 2024, Chainwire
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