{"id":4820,"date":"2023-08-15T09:51:38","date_gmt":"2023-08-15T16:51:38","guid":{"rendered":"https:\/\/jasonsblog.ddns.net\/?p=4820"},"modified":"2023-08-15T09:51:38","modified_gmt":"2023-08-15T16:51:38","slug":"still-fighting-federal-reserve-in-court-wyomings-custodia-bank-opens-2-services","status":"publish","type":"post","link":"https:\/\/jasonsblog.ddns.net\/index.php\/2023\/08\/15\/still-fighting-federal-reserve-in-court-wyomings-custodia-bank-opens-2-services\/","title":{"rendered":"Still Fighting Federal Reserve In Court, Wyoming\u2019s Custodia Bank Opens 2 Services"},"content":{"rendered":"\n

Nice write up on the politicization of banking using high risk and insurance costs. And it’s a nice commentary on Wyoming that they’re open to new forms of banking done with reasonable regulatory oversight. And Caitlin Long of Laramie, WY<\/a>, was a former investment analyst that came to recognize how powerful the Bitcoin<\/a> protocol was. <\/p>\n\n\n\n

https:\/\/cowboystatedaily.com\/2023\/08\/14\/still-fighting-federal-reserve-in-court-wyomings-custodia-bank-opens-2-services\/<\/a><\/p>\n\n\n

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By Ren\u00e9e Jean<\/p>\n\n\n\n

While continuing to fight the Federal Reserve in court, Custodia Bank CEO Caitlin Long has opened two services at the Wyoming-based digital bank that digital asset industries are clamoring for \u2014 money market mutual funds and dollar deposits.<\/h5>\n\n\n\n

The Federal Reserve has tried hard to buck Wyoming\u2019s digital banks, but Custodia Bank CEO Caitlin Long comes from a state where the motto \u201cCowboy Up\u201d comes as natural as breathing.<\/p>\n\n\n\n

And that she has done, quietly in some cases, like the recent \u201csoft\u201d opening of Custodia Bank last month without fanfare or press release, even as the digital bank continues to fight with the Federal Reserve in court.<\/p>\n\n\n\n

\u201cIn the banking world there\u2019s really no such thing as a \u2018soft\u2019 opening,\u201d Long told Cowboy State Daily. \u201cYou\u2019re either open or you\u2019re not. So, we haven\u2019t used that term.\u201d<\/p>\n\n\n\n

It would have been a misnomer anyway, Long added, because once the digital asset industry heard that Custodia Bank can now handle money market mutual funds and U.S. dollar deposits, Custodia was inundated with inquiries and new customers from a digital asset industry that now has few regulatory compliant options.<\/p>\n\n\n\n

\u201cWe got pretty much deluged with inquiries \u2014 and congratulations,\u201d Long said. \u201cIt\u2019s an industry that\u2019s underserved right now.\u201d<\/p>\n\n\n\n

A Quick Pivot <\/strong><\/p>\n\n\n\n

Money market mutual funds were not something Custodia Bank originally planned to do.<\/p>\n\n\n\n

\u201cWe had to pivot, so to speak,\u201d Long said. \u201cIf we had a master account, we would have been providing the payment services, but we\u2019re not an asset manager, so we wouldn\u2019t be doing the money market fund management.\u201d<\/p>\n\n\n\n

Custodia Bank sued the Federal Reserve over the rejection of its master account earlier this year. That lawsuit is still pending<\/a>, Long said, and Custodia Bank has no plan to back down.<\/p>\n\n\n\n

At the same time, Long needed to move her business forward lawfully so that it could keep going, and money market mutual funds were a way to do that.<\/p>\n\n\n\n

In lieu of having a master account for transactions, Custodia is partnering with other banks to handle that for them. Long declined to identify the bank\u2019s partners, but said Custodia has multiple partners helping it clear transactions.<\/p>\n\n\n\n

The dollar deposits, meanwhile, were a \u201cstep one\u201d to getting approval for Bitcoin custody, which actually was in the small Wyoming bank\u2019s original plan all along.<\/p>\n\n\n\n

\u201cThe interesting thing is, because we\u2019re a bank, in order to operate as a bank, we have to take U.S. dollar deposits,\u201d Long said. \u201cThat\u2019s a prerequisite. So, we had to get U.S. dollar deposits launched first before we could do Bitcoin custody.\u201d<\/p>\n\n\n\n

To accept dollar deposits, Custodia has to meet all the normal requirements set by Wyoming\u2019s state banking charter for Special Purpose Depository Institutions, including being a 100% fully reserved bank. That means it will not do any fractional reserve banking. It will hold 100% of deposits on hand.<\/p>\n\n\n\n

But Long also went above and beyond even that.<\/p>\n\n\n\n

\u201cThere was a whole list of requirements (from the Federal Reserve) that we committed to back in December that we would do,\u201d Long said. \u201cThe Fed denied us in January, but we went ahead and did everything anyway because we expect that, ultimately, we\u2019re where the puck is going to be.\u201d<\/p>\n\n\n\n

The hockey analogy, Long explained, just reflects that she\u2019s placing Custodia Bank where she expects the industry to land once all the regulatory dust settles.<\/p>\n\n\n\n

\u201cThe fact that we have partners tells you that there are banks who are still interested in moving forward,\u201d Long said. \u201cThey understand this technology is not going away. I think the rest of the industry is going to move toward us, in becoming banks.<\/p>\n\n\n\n

\u201cHow long that takes, I don\u2019t know \u2026 (But) we\u2019re ready to integrate with the Fed. We built everything we needed to do, including what\u2019s called the core program, and the risk-management program for the regional bank style. We have all of those things.\u201d<\/p>\n\n\n\n

Chokepoint 2.0 Is Also Live<\/strong><\/p>\n\n\n\n

Long said most digital asset companies have lost banking services in the wake of the collapse of Silicon Valley Bank and Signature Bank, amid a concurrent regulatory crackdown in Washington, D.C., which has seen even lawful customers lose banking services.<\/p>\n\n\n\n

\u201cThere was a big brouhaha that just happened in the UK with Nigel Farage, where a bank, his longtime bank, closed his account because he was deemed \u2018too high risk,\u2019\u201d Long said. \u201cSo yes, that is happening across the board, and it\u2019s happening to Wyoming industries as well, outside of digital assets.\u201d<\/p>\n\n\n\n

Many in the digital asset industry are calling it Chokepoint 2.0, Long said, which refers to the nickname of an effort during the Obama administration to de-bank lawful industries that are unpopular in Democratic circles by labeling them as \u201chigh risk.\u201d<\/p>\n\n\n\n

\u201cThere were 30 different industries that were targeted by bank regulators in Washington, D.C., as \u2018high risk,\u2019\u201d Long said. \u201cAnd a lot of them were Wyoming industries \u2014 oil and gas, firearms, ammunition, gaming, adult entertainment, payday lenders \u2014 things that were not so-called politically correct industries. There\u2019s no question that this is a round two of that, and the digital asset industry is at the top of the list.\u201d<\/p>\n\n\n\n

Long said debanking is not just happening to digital assets.<\/p>\n\n\n\n

\u201cI\u2019m still hearing that it\u2019s happening to the firearms industry,\u201d she said. \u201cAnd by the way, I will say that is an industry that we are willing to serve. I firmly do not believe that banking should be politicized.\u201d<\/p>\n\n\n\n

Long said she\u2019s also seen the pressure that\u2019s being applied to the digital asset industry firsthand.<\/p>\n\n\n\n

\u201cThe regulators will never say you can\u2019t serve the industry, but what they do say is, \u2018This is a high-risk industry,\u2019\u201d Long said. \u201cSo, if you\u2019re serving it, then you\u2019re going to get extra scrutiny, and you\u2019re going to be deemed higher risk. So maybe your FDIC insurance premiums go up.\u201d<\/p>\n\n\n\n

As a Special Purpose Depository Institution, Custodia Bank is a 100% reserved bank, which makes it immune to that particular pressure, Long said.<\/p>\n\n\n\n

New York And Wyoming In A Rare Moment Of Alignment<\/strong><\/p>\n\n\n\n

The lack of services for the digital asset industry means Custodia is stepping into something of a vacuum right now. And the fact that they are trying to do everything in a regulatory compliant way has helped them find customers without any problem, Long said.<\/p>\n\n\n\n

\u201cA lot of our customers are more interested in the money market fund services right now, because they\u2019re offering higher yield than deposit services, but they need to be able to pay their payroll, they need to be able to pay their vendors, so they need access to payment services in order to do that and we can offer that to them,\u201d Long said.<\/p>\n\n\n\n

Long added that it\u2019s interesting that a New York trust company just last week launched a Pay Pal stable coin. Washington, D.C., might be trying to lock down digital assets, but states are pushing back, and she\u2019s proud to be part of that.<\/p>\n\n\n\n

\u201cThe Fed objected to New York\u2019s approval of that Pay Pal stable coin, but they had no jurisdiction to effectuate that objection,\u201d Long said. \u201cSo it is interesting because the state\u2019s are pushing back and, in this example, New York and Wyoming are aligned, even though the Fed is pushing back the digital asset industry is a lawful industry and it cannot de-bank the industry entirely. So what New York did last week put us in good company.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

Nice write up on the politicization of banking using high risk and insurance costs. And it’s a nice commentary on Wyoming that they’re open to new forms of banking done with reasonable regulatory oversight. And Caitlin Long of Laramie, WY, was a former investment analyst that came to recognize how powerful the Bitcoin protocol was. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"class_list":["post-4820","post","type-post","status-publish","format-standard","hentry","category-tech"],"blocksy_meta":[],"featured_image_src":null,"author_info":{"display_name":"Jason","author_link":"https:\/\/jasonsblog.ddns.net\/index.php\/author\/jturning\/"},"_links":{"self":[{"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/posts\/4820","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/comments?post=4820"}],"version-history":[{"count":1,"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/posts\/4820\/revisions"}],"predecessor-version":[{"id":4822,"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/posts\/4820\/revisions\/4822"}],"wp:attachment":[{"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/media?parent=4820"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/categories?post=4820"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jasonsblog.ddns.net\/index.php\/wp-json\/wp\/v2\/tags?post=4820"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}