The Federal Reserve (Fed) has come out all guns blazing against Custodia Bank’s attempt to become a member of the Federal Reserve System, as it criticized the proposal and justified its rejection.
In an 86-page document released on Friday, the Fed claimed there are fundamental concerns about Custodia’s approach.
Custodia Bank, formerly known as Avanti, is a Wyoming state-chartered special depository institution. It applied to become a Federal Reserve System member and obtain a Federal Master account.
But the Fed rejected the application for membership in January 2023 after 18 months. Custodia filed a lawsuit against the Fed in June 2022 over its master account application which is still pending.
Fed Gives Detailed Reasons for Rejection
At the time of the rejection, the Fed stated that it rejected the application because of the significant risks surrounding the business model and insufficient risk management systems. Its…
