US Federal Reserve Rejects Custodia Bank’s Request For Fed Supervision

Key Points:

• Custodia Bank, a cryptocurrency bank, has been denied membership to the United States Federal Reserve System.
• Custodia has expressed a desire to join the Federal Reserve System to be regulated under the same standards that apply to traditional banks. By doing so, they hope to set a precedent for other crypto-banks to follow suit and be held to the same heightened standards.
• The lawsuit between Custodia and the Federal Reserve will continue as a district court has allowed it to proceed.

Custodia Bank, a cryptocurrency bank, has been denied membership to the United States Federal Reserve System.

The Fed rejected Custodia’s application in January 2023, citing an “insufficient” management framework, and has now denied their request for reconsideration. The central bank claimed that Custodia’s application was inconsistent with the required factors under the law.

In a joint declaration with the Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency, the Fed also stated that cryptocurrencies were “inconsistent with safe and sound banking practices.”

Custodia has expressed a desire to join the Federal Reserve System to be regulated under the same standards that apply to traditional banks. By doing so, they hope to set a precedent for other crypto-banks to follow suit and be held to the same heightened standards.

Meanwhile, the lawsuit between Custodia and the Federal Reserve will continue as a district court has allowed it to proceed. This decision comes after Custodia filed a lawsuit against the Federal Reserve for denying their application to become a member of the Federal Reserve System. The outcome of this lawsuit will have significant implications for the future of cryptocurrency banking and its relationship with traditional banking systems.

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