Custodia’s Caitlin Long Blasts Fed Over BNY Mellon Entering Crypto

BNY Mellon, the oldest and largest Wall Street bank, announced its crypto custody service yesterday was bitter news for Caitlin Long.

The founder and CEO of crypto bank Custodia spent 22 years on Wall Street before moving back to Wyoming to work in blockchain.

In 2020, at the onset of the COVID-19 pandemic, she founded Avanti Bank, which would later become Custodia. At the time, it was only the second such cryptobank to receive a state banking charter, allowing it to hold both traditional and crypto assets.

And for the past two and a half years, Long has been waiting for a decision on the bank’s application for a main account with the Federal Reserve, which would allow the bank to operate like its traditional competitors, which lend out customer deposits. Actually the company file a lawsuit in June, over what it calls the Feds “manifestly unlawful delay.”

“You will see a filing from my company in that lawsuit related to this morning’s announcement because the Federal Reserve filed a filing last week that talked about the risk to the financial system from crypto and today a bank holding company under the supervision of the Federal Reserve entering crypto,” Long said while speaking on a panel at a DC Fintech Week event on Tuesday. “We’ve been waiting two and a half years to do that. And look at what the Fed actually said last week versus what it did today.”

Tyler Lindholm, state policy director for Sen. Cynthia Lummis and former co-chair of the Wyoming Blockchain Task Force, described the situation as evidence of favoritism on the part of the Fed. “This is the Federal Reserve picking winners and losers,” he tweeted yesterday. “They ‘picked’ the oldest bank in the US for custody, but have blocked Fintech start-up banks in Wyoming.

BNY Mellon said yesterday that it received approval to begin offering a crypto custody service from the New York Department of Financial Services, but did not name any federal regulators.

“We have an active and positive dialogue with regulators,” a spokesperson said Decrypt in an email.

All federally chartered banks have a general account, which allows them to send payments to the Fed. If Custodia’s application is approved, it would bring crypto into the US banking system in a very big way.

Last month, the Fed announced the adoption of a framework for “fintech firms and other emerging financial firms” to obtain master accounts. The announcement laid out different levels of access, but stressed that institutions “should not present or create undue credit, operational, settlement, cyber or other risks” to the financial system.

But now BNY Mellon, which already has a main account, will hold crypto on behalf of its clients.

BNY Mellon said yesterday that it received approval to begin offering a crypto custody service from the New York Department of Financial Services, but did not name any federal regulators.

“We have an active and positive dialogue with regulators,” a spokesperson said Decrypt in an email.

All federally chartered banks have a general account, which allows them to send payments to the Fed. If Custodia’s application is approved, it would bring crypto into the US banking system in a very big way.

Last month, the Fed announced the adoption of a framework for “fintech firms and other emerging financial firms” to obtain main accounts. The announcement laid out different levels of access, but stressed that institutions “should not present or create undue credit, operational, settlement, cyber or other risks” to the financial system.

But now BNY Mellon, which already has a main account, will hold crypto on behalf of its clients.