Bitcoin has been incurring some price spikes over the past few weeks that have caused crypto to jump back onto the financial map like it never did in 2022. However, the space has been delivered a blow now that the Federal Reserve has denied the application of crypto bank Custodia to be a member of the official Fed system.
The Fed and Custodia Are Again Duking It Out
The agency warned that the organization suffers from “safety and soundness risks” and thus is not in good enough shape to join itself to the Fed’s hip. In a statement, the Federal Reserve stated:
The board has previously made clear that such crypto activities are highly likely to be inconsistent with safe and sound banking practices. [The] risk management framework was insufficient to address concerns regarding the heightened risks associated with its proposed crypto activities, including its ability to mitigate money laundering and terrorism financing risks.
There is a lot of mistrust of cryptocurrency following the debacle of FTX, the cryptocurrency exchange founded and run by Sam Bankman-Fried. Once considered the ultimate crypto trading haven, the company fell apart last November and filed bankruptcy after its founder complained of a liquidity crunch on social media just weeks prior.
However, from there, the dirt surrounding the company began to make itself known. Sam Bankman-Fried was accused of fraud and various other crimes. It was alleged that the executive had used customer funds to pay off loans for his other company Alameda Research and to purchase luxury Bahamian real estate. Sam Bankman-Fried was later arrested in the Bahamas and extradited back to the U.S., where he presently awaits trial at his parents’ California home.
Custodia chief executive Caitlin Long expressed her dissatisfaction with the ruling in a recent interview. Long mentioned:
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.
The 2nd Fight in a Year
Custodia is based in Wyoming, a state long known for its pro (or at least relaxed) crypto rules. The state is also headed by Senator Cynthia Lummis, which is extremely interested in crypto and blockchain and recently introduced a bill to Congress that if passed, would establish protocols by which members of both the House and Senate who were looking to write crypto bills in the future would have to abide by.
This is not the first time that Custodia and the Federal Reserve have been at odds with each other. Last July, the crypto institution filed suit against the financial agency, claiming it had “unlawfully” delayed its application for a master account. The goal of the account was to limit company costs and bring both traditional and digital finance closer together.
Source: https://www.livebitcoinnews.com/crypto-bank-custodia-sees-its-fed-application-denied/