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The Federal Reserve Board Wyoming Cryptocurrency Bank Rejected An application for membership in the Federal Reserve, officials announced on Friday, has brought a setback to the crypto industry’s attempt to build acceptance in mainstream US banks.
As a pioneer in crypto banking, many in the crypto industry are eyeing Cheyenne-based Custodia Bank’s more than two-year-old application. Approval would have meant access to Federal Reserve services, including electronic payment systems.
The refusal raises questions about the viability of crypto banking, especially in Wyoming, which has sought to become a hub for crypto banking, exchanges, and mining.
Custodia’s business model and focus on cryptocurrencies posed “substantial safety and soundness risks” for depositors. Federal Reserve Board said in a statement.
Federal Reserve officials during the Fed Listens event in Washington, DC, Friday, Sept. 23, 2022. (Aldrago/Bloomberg via Getty Images/Getty Images)
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“The board has previously made clear that such cryptocurrency activities are likely to conflict with safe and sound banking practices,” it added.
The board also expressed doubts about Custodia’s ability to discourage money laundering and terrorist financing via cryptocurrencies.
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Custodia sued the Federal Reserve Board and the Kansas City Federal Reserve Bank in Wyoming federal court last year, accusing them of taking unreasonably long to process their applications. In a statement on Friday, the company said it was “surprised and disappointed” by the rejection and promised to continue to pursue litigation in the matter.
“Custodia provided a secure, federally regulated alternative to reckless speculators and cryptocurrency scammers. US banking system, with disastrous results for some banks. Custodia has aggressively sought federal regulation beyond all requirements that apply to traditional banks,” said CEO Caitlin Long.
File photo: A representation of the cryptocurrency is shown in this diagram on 10 August 2022. (REUTERS/Dado Ruvic/Illustration/Reuters Photos)
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Wyoming has passed many crypto and blockchain-friendly laws and regulations in recent years. Bitcoin, Ethereum and other cryptocurrencies Run. A new law allows state-licensed crypto banks called special purpose depository institutions.
The state of Wyoming has chartered four crypto banks called SPDI or “Speedy”, including Custodia. They have shown little public activity while their custodian application is pending.
