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Custodia Bank CEO Caitlin Long on February 24 blasted the U.S. regulators for being “two-faced” in the case of crypto and bank relations. The comment comes in response to a joint statement issued by U.S. regulators warning banks of liquidity risks from crypto market instability and broader selloff.
Caitlin Long took to Twitter to reveal that U.S. Federal agencies the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) guided banks to avoid lending out deposits made by crypto customers due to liquidity risk. Also, banks should hold cash to support such deposits. Long says the regulators are criticizing Custodia Bank for proposing the same.
“THIS IS JUST NUTS–the Fed issues guidance today saying banks shouldn’t lend out deposits made by their crypto customers due to the liquidity risk & should hold cash to back the deposits instead, while simultaneously skewering Custodia Bank for proposing to do just that.”
On one side, regulators such as the U.S. SEC increase risks for investors with their “regulation by enforcement” approach. While on the other side, regulators agree with the risks to banks with crypto market instability.
Meanwhile, the U.S. Federal Reserve Board has again denied the request by Custodia Bank for reconsideration of the Board’s decision last month on its application to be supervised by the Federal Reserve. The Fed Board earlier denied the application submitted by Custodia Bank, citing it did not meet the requirements set out in the law.
Custodia Bank Reaches Court
Custodia Bank seeks to become a member of the U.S. Federal Reserve System and has Fed supervision and gain access to a Master Account through the Kansas City Fed. The bank sued the Federal Reserve System over denying access to the payments system.
In the latest development, U.S. District Judge Scott Skavdahl denies the Fed’s motion to dismiss the case filed by Custodia Bank. The judge agrees with the bank’s case against the Fed for having the right to access a Master Account.
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