• The U.S. Federal Reserve has denied a request from Custodia Bank, formerly known as Avanti, to become supervised by the government agency.
• Caitlin Long is the CEO and founder of Custodia Bank and it obtained a charter in Wyoming that allows it to operate a special-purpose depository institution and call itself a crypto bank.
• Kraken also obtained the same charter to operate similarly, and both companies have complained about federal regulation in recent weeks.
Custodia Bank Rejected By Federal Reserve
The U.S. Federal Reserve announced on Feb. 23 that it had denied a request through which Custodia Bank sought supervision from the government agency. The bank, formerly known as Avanti, is led by CEO and founder Caitlin Long who obtained a charter in Wyoming that allows it to operate a special-purpose depository institution and call itself a crypto bank.
Reasons For Rejection
The Federal Reserve justified its original rejection on Jan. 27 by stating that Custodia does not have federal deposit insurance and by highlighting the risks of its various cryptocurrency-focused activities. The government agency said that Custodia’s application, as originally submitted, is „inconsistent with the required factors under the law.“
Kraken Also Obtains Charter
Crypto exchange Kraken has also obtained the same charter to operate similarly as Custodia Bank has done. Both companies have complained about federal regulation in recent weeks due to their involvement with cryptocurrencies which are not yet fully regulated or accepted by governments around the world for transactions and investments..
Caitlin Long’s Reaction
In response to this decision from the Fed, Caitlin Long has expressed her disappointment at what she sees as an unnecessary barrier for companies seeking to innovate within cryptocurrency industries regulated under existing laws: “I am disappointed but remain hopeful that there will be progress over time“.
Custodia Bank’s application was rejected based on its lack of federal deposit insurance and risk associated with its cryptocurrency activities; however, despite this setback there remains hope that progress can still be made towards further development within this industry going forward