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The United State Federal Reserve Board has rejected the Custodian Bank’s application to become a member of the Federal Reserve System. In its announcement, the Fed stated that the application was “inconsistent with the factors required by law.” It also claimed Custodia had an “inadequate” management framework and cited a previous joint declaration by the Fed with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency that found crypto assets to be contrary to sound banking practices.
STATEMENT FROM CUSTODIA BANK regarding today’s Federal Reserve action on its membership application. His main account application is still pending: pic.twitter.com/QkMjcT508J
— Custodia Bank™ (@custodiabank) January 27, 2023
Despite the denials, the bank’s application for the main account remains pending, the bank said in a tweet. So-called “master accounts” allow banks to make international transfers and perform other important functions. Custodia, led by Caitlin Long, filed an application for a prime account in 2020 and sued the Fed over a lengthy delay in considering the application in June.
The Fed gave banks 72 hours to withdraw its application, Custodia said in a statement. He added, “Custodia is actively seeking federal regulation, going beyond all the requirements that apply to traditional banks.”
The Fed only issued guidelines for awarding prime accounts in August, when it became clear that digital asset banks could have difficulty accepting accounts. “Institutions that engage in new activity and whose authorities are still developing appropriate regulatory and supervisory frameworks will undergo a broader review,” the Fed said in a statement at the time.
This article is currently under development.
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