The U.S. Federal Reserve announced on Feb. 23 that it had denied a request through which Custodia Bank sought supervision from the government agency.
Custodia asked the Federal Reserve to reconsider a similar rejection from last month. At that time, the bank sought to become a member of the Federal Reserve system.
The Federal Reserve justified its original rejection on Jan. 27 by stating that Custodia does not have federal deposit insurance and by highlighting the risks of its various cryptocurrency-focused activities. The government agency said that Custodia’s application, as originally submitted, is “inconsistent with the required factors under the law.”
Custodia Bank was formerly known as Avanti. Caitlin Long, a former Wall Street executive with past roles at Credit Suisse and Morgan Stanley, is CEO and founder.
Custodia is notable for obtaining a charter in Wyoming that allows it to operate a special-purpose depository institution and call itself a crypto bank. Crypto exchange Kraken has also obtained the same charter to operate similarly.
Both companies have complained about federal regulation in recent weeks.