The Federal Reserve is unlikely to provide cryptocurrency firm Custodia Bank access to its payment system as ties between the digital asset space and traditional lending face tougher scrutiny in the face of the fallout from FTX ( FTT-USD ), Bloomberg reported Friday, citing two people familiar with the matter. Cheyenne, Wyoming-based Custodia, formerly known as Avanti Financial Group, is a chartered lender that offers digital asset-focused financial services to various business. The firm was said to have sued the Federal Reserve Board and the Kansas City Fed over a long-standing processing of its application for a master account at the U.S. central bank. The increased resistance to Custodia, founded in 2020 by long-time bitcoin ( BTC-USD ) advocate Caitlin Long, comes amid increased regulatory scrutiny of the relationship between crypto and traditional banking, triggered by the November 2022 collapse of crypto exchange FTX ( FTT-USD ). In October 2022, Michael Barr, the Federal Reserve's vice chair of supervision, deemed that crypto firms' deposits pose "heightened liquidity risks" for banks .
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