{"id":172980,"date":"2023-03-24T20:52:59","date_gmt":"2023-03-24T20:52:59","guid":{"rendered":"https:\/\/precoinnews.com\/?p=172980"},"modified":"2023-03-24T20:52:59","modified_gmt":"2023-03-24T20:52:59","slug":"fed-cites-bank-runs-other-crypto-risks-for-custodia-rejection","status":"publish","type":"post","link":"https:\/\/precoinnews.com\/world-news\/fed-cites-bank-runs-other-crypto-risks-for-custodia-rejection\/","title":{"rendered":"Fed cites bank runs, other crypto risks for Custodia rejection"},"content":{"rendered":"
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Photographer: Graeme Sloan\/Bloomberg via Getty Images<\/p>\n
The Federal Reserve, in an order published Friday, explained that it rejected Custodia Bank's application to become a member bank due to possible runs on the bank, among other risks. <\/p>\n
Why it matters: <\/strong>The state-chartered Wyoming special purpose depository institution (SPDI) has been pushing a new banking model that makes money on fees, not by investing deposits.<\/p>\n The big picture<\/strong>: Two running narrative threads in crypto converge in the Custodia saga. One, that there is a coordinated effort to shut down the industry, and two, that crypto poses serious safety and soundness risk to the U.S. financial system and therefore should be kept out of it. <\/p>\n What they're saying<\/strong>: In its 86-page order, the Fed pretty much says the latter (And the industry would say the Fed's actions confirm the effective crypto prohibition). <\/p>\n Yes, but<\/strong>: In the wake of real, less theoretical bank runs, CEO Caitlin Long has pointed out that Custodia had always proposed holding $1.08 in cash per dollar deposited.<\/p>\n Details<\/strong>: The Fed evaluates on factors in considering membership, and it found that in terms of financial, managerial, corporate powers, Custodia's application was "inconsistent."<\/p>\n Quicktake<\/strong>: It's the crypto. <\/p>\n Of note<\/strong>: The Fed focused in on what it refers to as Custodia's "stablecoin," dollar-denominated tokens that would facilitate crypto transactions between counterparties or what Custodia calls Avits.<\/p>\n What we're watching<\/strong>: Custodia is suing the Fed, saying it cannot deny them. <\/p>\n\n
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