The bank's unique business model and focus on crypto-assets present significant safety and soundness risks. The board also noted that the bank's risk management framework was not sufficient to address concerns about money laundering and terrorism financing.
Fed's Denial Sparks Litigation
Custodia Bank is surprised and disappointed by the decision and has offered a "safe, federally-regulated, solvent alternative to the reckless speculators and grifters of crypto that penetrated the U.S. banking system."
The CEO of Custodia, Caitlin Long, has said that the Fed's denial is consistent with the concerns the company has raised about the Federal Reserve's handling of its applications and that it's an issue that the company will continue to prosecute.