The Wyoming-based financial institution Custodia Bank plans to launch Bitcoin custodial service for its diverse clients. Speaking at the Bitcoin 2023 panel in Miami, Custodia Bank chief executive Caitlin Long stated that the diversification of businesses had compelled companies to separate the custody service offering from the other asset management products.
In her presentation, Long outlined different investment companies, including corporate, advisory, and registered investments. Initially, Custodia Bank had issued a 60-day notice informing the customers of the impending launch of Bitcoin custodial services.
Custodia Bank Rolls Out Bitcoin Custody Services
Notably, the Bitcoin 2023 event recorded the highest absenteeism rate due to crypto market uncertainty. Dylan Leclair, the head of market research, was the core moderator. He worked closely with the chief executive of Lumida Ram Ahluwalia and his close ally Mark Connor the head of research and development at 3iQ.
Based on the Wyoming special purposed depository institution (SPDI) requirement, the regulators demand that the bank provide a 60 days notice before developing custody services for their preferred digital asset.
In her address, Long briefed the history of Custodia banks explaining how it was started as a hardcore Bitcoiner. She lamented that the world is still unprepared for hyperbitcoinization.
According to Long, hyperbitcoinization is a situation whereby Bitcoin becomes the default value whereby most people will prefer BTC compared to the other fiat currencies. She stated that hyperbitcoinization would undermine the growth of the traditional financial system.
Long opposed the idea whereby one financial system hinders the growth of the other. She later explained the benefits of adopting two financial models in the economy.
Custodia Bank Sues Federal Reserves
Over the past, Custodia Bank has been providing a complete package of financial tools to meet the customer’s ever-changing demands. Initially, the bank was named Avanti before undergoing further restructuring.
Reportedly, the Custodia Bank was the first financial institution to comply with Wyoming SPDI requirements. The attempt to uphold compliance forced the Custodia Bank to seek Fed approval to allow the bank to become a member institution.
The Custodia group anticipates that the bank will be permitted to access the Fedwire network after obtaining the Fed approval. In 2022, the Fedwire network supported over a hundred million transactions, which generated revenue of $1 quadrillion.
After reviewing the Custodia proposal, the Fed observed inconsistency in the bank’s business plan. On January 27 Fed dismissed the proposal submitted by the crypto-friendly bank due to the potential risk associated with digital assets.
Factors Contributing to Bank Crisis
The Custodia team lamented that the Fed failed to respond within a week, limiting the firm’s expansion. After 19 weeks of waiting, the Custodia bank considered the delays unlawful and filed a new lawsuit against the Fed.
In their court submission, the bank argued that Fed’s delays undermined the firm’s ability to provide crypto-related service to retail and institutional clients.
In her presentation, Long failed to update the attendees on the progress of the Fed lawsuit. However, Long condemned the actions taken by the Fed during the collapse of Silvergate, Silicon Valley, and Signature Bank.
In March, the head of supervision at the Fed, Michael Barr, issued an anti-crypto speech arguing that the agency’s supervisory approach prevented the banks from collapsing. Barr’s speech coincided with the liquidation of Silicon Valley due to the banking crisis in the US.