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The head of the Wyoming-based bank was taken aback when BNY Mellon was approved to provide crypto custody services; her bank’s master account application is still not processed.
Custodia Bank founder Caitlin Long had a strong reaction to the news that BNY Mellon has launched a digital custody platform for Ether (ETH) and Bitcoin (BTC) holdings. Speaking at DC FinTech Week on Oct. 11, she made a comparison between the Federal Reserve’s actions and policies.
BNY Mellon is the first large United States bank to offer the custody of digital assets and traditional investments on the same platform. The bank will store private keys and provide bookkeeping services. Custodia Bank, formerly known as Avanti, filed suit against the Federal Reserve Board of Governors and the Federal Reserve Bank of Kansas City in June.
Custodia Bank claimed the 19 months the bank had waited by that time for the processing of its application for a master account was “an unlawful delay,” as the U.S. Code specifies a one-year processing deadline on such applications.
— Nick Alexander (@__nickalexander) October 11, 2022
“We applied to become a Fed member bank, totally committed to complying with all the requirements of becoming a federally regulated Fed member bank," Long said, "But what’s fascinating is that the bank regulators and the SEC [Securities and Exchange Commission] have just been allergic to this whole concept of having banks or broker-dealers be involved.”
Long also said:
“You will see a filing in that lawsuit pertaining to that announcement this morning, because the Federal Reserve filed filings last week talking about the risk to the financial system from crypto. And then today, a Federal Reserve-supervised bank holding company enters crypto? We’ve been waiting two and a half years for that, and look at what the Fed actually said last week versus what they did today.”
Long was apparently referring to a paper released on Oct. 4 by the Federal Reserve Bank of New York titled “The Financial Stability Implications of Digital Assets.” The paper drew several conclusions about the potential negative effect of stablecoins on the financial system.
Avanti was one of the first Special Purpose Depository Institutions (SPDIs), or “blockchain banks,” created under a 2019 Wyoming regulatory framework.
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