Custodia, formerly known as Avanti Bank has been waiting almost 18 months.
The Wyoming-based bank sued the Federal Reserve in June 2022.
Custodia Bank’s application for membership in the Federal Reserve System was rejected by Federal Reserve Board in the United States. This was on the grounds that the bank’s “novel business model and proposed focus on crypto-assets presented significant safety and soundness risks.”
The Fed also noted that Custodia’s risk management system was inadequate. To address concerns about the elevated risks associated with its anticipated crypto operations. Such as the company’s capacity to minimize money laundering and terrorist financing issues.
Surprised and Disappointed by Boards Action
Custodia, formerly known as Avanti Bank has been waiting almost 18 months. For a response to its application to join the Federal Reserve System.
Caitlin Long, Custodia’s CEO, stated:
“Custodia is surprised and disappointed by the Board’s action today. The Fed advised Custodia 72 hours ago that it could either withdraw its membership application or see it denied, and the Fed denied it in record time.”
Moreover, Custodia pursued federal regulation vigorously, exceeding all rules applicable to conventional banks. The bank in Wyoming has not yet received a master account. Which would allow it to settle transactions with other lenders using the Federal Reserve payments system. The original paperwork was submitted in October 2022.
Opening, intraday, and closing balances are recorded in a Master Account, which is the record of the financial rights and responsibilities of an Account Holder and the Administrative Reserve Bank or any other Reserve Bank keeping a Master Account.
Furthermore, Custodia sued the Federal Reserve in June 2022, claiming the Fed had exceeded the 12-month deadline for making a decision on Custodia’s application for a master account.