Federal Reserve’s Request for Crypto Bank of Wyoming Denied

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CHEYENNE, Wyo. (AP) The Federal Reserve Board has rejected a Wyoming cryptocurrency bank’s application to join the Federal Reserve system, officials said Friday, reversing attempts by the cryptocurrency industry. cryptography to build acceptance in mainstream US banking.

Many crypto players have turned to Cheyenne-based Custodia Bank’s 2+ year old app as a crypto banking indicator. Approval would have meant access to Federal Reserve services, including its electronic payments system.

The rejection adds to doubts about the viability of crypto-banking, especially in Wyoming, a state that has sought to become a hub for crypto-banking, exchanges and mining.

Custodia’s business model and focus on crypto presented significant risks to the safety and soundness of depositors, the Federal Reserve Board said in a statement.

The board has previously made it clear that such crypto activities are very likely to be inconsistent with safe and sound banking practices, he added.

The board also expressed doubts about Custodia’s ability to deter money laundering and terrorist financing through crypto.

Last year, Custodia sued the Federal Reserve Board and the Federal Reserve Bank of Kansas City in federal court in Wyoming, accusing them of taking an unreasonably long time for its claim. In a statement Friday, the company said it was surprised and disappointed by the rejection and pledged to continue to litigate the matter.

“The Custodia offered a safe, federally regulated, creditworthy alternative to reckless speculators and crypto scammers who penetrated the U.S. banking system, with disastrous results for some banks. The Custodia actively sought federal regulation, going to beyond any requirements that apply to traditional banks,” CEO Caitlin Long was quoted as saying in the statement.

In recent years, Wyoming has passed many crypto-friendly and blockchain-friendly laws and regulations, the electronic ledgers on which Bitcoin, Etherium, and other cryptocurrencies operate. A new law allows state-chartered crypto banks known as special purpose depository institutions.

Wyoming has chartered four such crypto banks called SPDIs, or speedies,” including Custodia. They showed little public activity while the Custodia application was pending.

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