Fed Balks at Custodia’s Bid for Membership in Payment System (2)

Crypto firm Custodia Bank Inc.’s application to become a member of the US Federal Reserve has been denied, setting up a roadblock in the company’s bid to get coveted access to the central bank’s payment system.

“The firm’s novel business model and proposed focus on crypto-assets presented significant safety and soundness risks,” the Federal Reserve Board said in a statement Friday. “The Board has previously made clear that such crypto activities are highly likely to be inconsistent with safe and sound banking practices.”

The Fed flagged Custodia’s risk-management framework, saying it wasn’t sufficient to address concerns “regarding the heightened risks ...