Federal Reserve Rejects Custodia's Crypto Plans Over Risk Concerns

The Federal Reserve Board has released an 86-page explanation for its rejection of Custodia Bank's membership application, citing "significant deficiencies" in the bank's ability to manage risks and comply with banking laws. The Fed also expressed concerns about Custodia's revenue model, which relies heavily on the existence of an active and vibrant market for crypto-assets, and its decision not to insure deposits. The regulator's criticism of Custodia's business plan may not only be a danger to itself but also to the crypto customers it's seeking to serve. The Fed's position suggests the virtual impossibility of banks engaging with stablecoins issued on open, public blockchains.