Custodia Bank was denied Federal Reserve membership, while certain crypto principal activities are deemed presumptively not appropriate for member banks.
On January 27, 2023, the Board of Governors of the Federal Reserve System (Federal Reserve) took two actions, clarifying that it considers many cryptocurrency activities to be inconsistent with the business of banking. First, the Federal Reserve announced that it had denied the application of Custodia Bank, Inc. (Custodia) to become a member of the Federal Reserve System. Second, using its authority under Section 9(13) of the Federal Reserve Act, it issued a policy statement (Policy Statement) whose purpose was to “level the playing field” for state and national banks with respect to “novel activities.”
With these actions, and the current cautious attitude toward cryptocurrency at the Office of the Comptroller of the Currency (OCC), state banking supervisors will likely be the ones advancing new developments in crypto activities.