Slashdot: Wyoming Crypto Bank Denied for Federal Reserve System Membership

Wyoming Crypto Bank Denied for Federal Reserve System Membership
Published on January 29, 2023 at 12:04AM
The Associated Press reports that America's Federal Reserve Board "has denied a Wyoming cryptocurrency bank's application for Federal Reserve System membership, officials announced Friday, dealing a setback to the crypto industry's attempts to build acceptance in mainstream U.S. banking." Many in crypto have been looking to Cheyenne-based Custodia Bank's more than 2-year-old application as a bellwether for crypto banking. Approval would have meant access to Federal Reserve services including its electronic payments system. The rejection adds to doubts about crypto banking's viability, particularly in Wyoming, a state that has sought to become a hub of crypto banking, exchanges and mining.... Custodia sued the Federal Reserve Board and Federal Reserve Bank of Kansas City in Wyoming federal court last year, accusing them of taking an unreasonably long time on its application. In a statement Friday, the company said it was "surprised and disappointed" by the rejection and pledged to continue to litigate the issue. In a statement, America's Federal Reserve Board argued argued that Custodia's "novel business model" and focus on crypto-assets "presented significant safety and soundness risks." "The Board has previously made clear that such crypto activities are highly likely to be inconsistent with safe and sound banking practices. "The Board also found that Custodia's risk management framework was insufficient to address concerns regarding the heightened risks associated with its proposed crypto activities, including its ability to mitigate money laundering and terrorism financing risks."

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