The United States Federal Reserve Bank has denied the request of a cryptocurrency bank named Custodia Banks to reconsider its membership application to the Federal Reserve System. Alongside this, the district court has allowed a lawsuit between two parties to continue. The central bank perceived the request as inconsistent with the required factors under the law stating it as the reason for denial.
Besides, the Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency, the central bank claims cryptocurrencies were inconsistent digital assets with safe and sound banking practices. Alongside, the Federal Reserve shared that Custodia had an insufficient management framework.
On the other side, Custodia wished to join Federal Reserve System for regulating under the standards that apply to traditional banks as this would have opened an opportunity for opening another crypto bank with the same heightened standards.
Earlier in this week, Wyoming District Court denied the motion from the Federal board and dismissed the lawsuit from Custodia after a delay of two years for a Federal Reserve Master Account. Obtaining a master account would allow Custodia to access Federal Reserve Payment Systems without interference from third–party banks.
Although Fed dismissed the case due to the account denial by making the lawsuit moot. However, Custodia again filed the proposal with amendments on February 17 but Fed rejected the application as a part of the “Concentrated and coordinated” effort with Joe Biden’s administration. Alongside this, the Judge ordered Custodia to file its first amended complaint by March 1, 2023.
