Fed Board denies Custodia Bank application

The Federal Reserve Board on Friday announced its denial of the application by Custodia Bank, Inc., Cheyenne, Wyoming, to become a member of the Federal Reserve System. The Board has concluded that the firm's application as submitted is inconsistent with the required factors under the law.

Custodia is a special-purpose Wyoming-chartered depository institution that does not have federal deposit insurance. The firm proposed to engage in novel and untested crypto activities that include issuing a crypto asset on open, public and/or decentralized networks.

The firm's novel business model and proposed focus on crypto-assets presented significant safety and soundness risks.