by • The United States Federal Reserve has denied Custodia Bank’s application to become a member of the Federal Reserve System.
• The Fed cited an inconsistency with the required factors under the law and an insufficient management framework.
• Custodia Bank’s application for a master account remains pending.
The Federal Reserve Board of the United States has announced its decision to reject Custodia Bank’s application to become a member of the Federal Reserve System. The bank, headed by Caitlin Long, applied for the application in 2019, and the Federal Reserve cited an inconsistency with the required factors under the law and an insufficient management framework as reasons for the rejection.
The Federal Reserve stated that Custodia Bank’s application was at odds with sound banking practices and that its management framework was not up to par. This was further supported by a joint declaration from the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Federal Reserve Board. Custodia Bank sued the Federal Reserve in June over the long delay in considering the application.
In spite of the rejection, Custodia Bank’s application for a master account still remains pending. A master account is a type of account that enables a bank to carry out crucial functions, such as making international transfers. The bank expressed its disappointment with the decision in a tweet, saying that its master account application remains pending.
The rejection of Custodia Bank’s application is a major setback for the bank, as it was hoping to become a member of the Federal Reserve System. The decision is also likely to have an impact on the crypto sector, as it is yet another example of the Federal Reserve’s reluctance to accept crypto assets. Despite the rejection, Custodia Bank still has hope that its application for a master account will be approved.
