Custodia Bank, a cryptocurrency-friendly bank founded by Bitcoin advocate Caitlin Long, has launched its Bitcoin custody platform.
The firm took to X (formerly Twitter) on Nov. 7 to announce the launch of Custodia Bank’s Bitcoin (BTC) custody service targeting businesses like fiduciaries, investment advisers, fund managers and corporate treasurers.
Custodia Bank started rolling out custody in October 2023 after receiving approval from the Wyoming Division of Banking, Custodia founder and CEO Long told Cointelegraph. “The regulator conducted the statutorily required pre-launch examination of us,” the exec said, adding that Wyoming has specific rules that its special-purpose depository institutions must meet before launching custody.
According to the bank’s website, Custodia Bank operates as Custodia Digital Services in certain U.S. states, including Washington, Minnesota, Texas and others. The bank also operates as Custodia Bank in other states like California and Wyoming. Eligible users include U.S.-based businesses in states the bank is licensed, and which meets Custodia’s customer onboarding requirements, Long noted.
Custodia Bank emphasized that the platform is a non-lending bank built by Bitcoiners that offers segregated custody accounts on its custom-built Bitcoin custody platform.
Unlike the omnibus custody model, the segregated account model for Bitcoin custody is designed to separate customers’ assets from the company’s assets, Custodia’s white paper reads. “The omnibus custody model dominates traditional financial markets, with most securities held at central securities depositories like the Depository Trust Company,” the document stated, adding:
“We offer segregated accounts, which have superior customer protections over competing omnibus accounts that are standard offerings in the digital asset custody industry, and which commingle customer digital assets.”
Custodia Bank’s approval from the Wyoming Division of Banking follows a series of regulatory challenges for the firm. In January 2023, the Federal Reserve Board rejected the bank’s application to become a member of the Federal Reserve System, saying it was “inconsistent with the required factors under the law.” The Fed subsequently denied Custodia’s request to reconsider its membership application in its system.
In a detailed report in March 2023, the Fed’s board said the decision to reject Custodia’s application was due to concerns about banks with a high concentration of activities related to the crypto industry. Custodia Bank opened for business in August 2023, though the Fed has blocked much of its proposed business model.
Founded in 2020, Custodia is a bank aiming to bridge the gap between digital assets and the U.S. dollar payments system and a digital asset custodian. The firm was formerly known as Avanti Financial Group and is based in Cheyenne, Wyoming.