US Federal Reserve denies Custodia Bank’s request for Fed supervision

The United States Federal Reserve has denied a request from cryptocurrency bank Custodia Bank to reconsider its membership application to the Federal Reserve System.

The Fed announced its denial on Feb. 23 saying the Federal Reserve Board previously decided that Custodia’s application “was inconsistent with the required factors under the law.”

@federalreserve announces it has denied the request by Custodia Bank, Inc., for reconsideration of the Board’s decision last month on its application to be supervised by the Federal Reserve: https://t.co/ZYNUEoLeN1

— Federal Reserve (@federalreserve) February 23, 2023

In January, the Fed rejected Custodia’s application to become a member. Board rules allow applicants to request a reconsideration of membership decisions.

At the time of the initial rejection, the Fed claimed Custodia had an “insufficient” management framework.

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It also cited a joint declaration it made alongside the Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC) that claimed cryptocurrencies were “inconsistent with safe and sound banking practices.”

Custodia has said it wishes to join the Federal Reserve System so it can be regulated under the standards that apply to traditional banks and open a path for other crypto-banks that wish to be held to those same heightened standards.