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Wyoming Considers Own Federal Reserve Account After Custodia Bank Rejection

Wyoming Considers Own Federal Reserve Account After Custodia Bank Rejection

May 24, 2024

Wyoming Considers Own Federal Reserve Account After Custodia Bank Rejection

Wyoming legislators are exploring the possibility of the state applying for its own master account with the Federal Reserve. This comes after the Wyoming-based digital bank, Custodia, was denied access to the Federal Reserve's services through a master account, which is essential for banks to operate effectively.

Custodia Bank CEO Caitlin Long, whose Special Purpose Depository Institutions (SPDI) bank was affected, recommended this course of action. She cited Texas as an example, which has benefited from having its own master account since 1996, saving millions of dollars in banking fees and providing financial autonomy.

Long emphasized the historical context of federalism in the U.S. banking system, which was intended to prevent centralized control by a politicized Federal Reserve. She referred to the words of Frank Mondell, a rancher from Newcastle, who in 1913 warned about the risks of centralization of banking power.

The CEO also raised concerns over what she believes is a resurgence of practices similar to "Operation Chokepoint," a discontinued initiative by the U.S. Department of Justice that targeted politically unpopular but legal businesses, causing significant issues for Wyoming industries such as oil and gas.

According to Long, recent actions by Federal Reserve officials, which led to the closing of Custodia's accounts, demonstrate a continuation of such politicized tactics. Long argued that obtaining a master account for Wyoming could protect its residents and industries from such targeted de-banking.

Wyoming lawmakers on the Select Committee on Blockchain, Financial Technology, and Digital Innovation Technology expressed support for the idea. State Rep. Cyrus Western, R-Big Horn, highlighted the initiative as a means of financially empowering people. Similarly, Sen. Chris Rothfuss, D-Laramie, showed interest but sought more information on the details and potential risks. Long reassured that the risks would be low, as shown by Texas's example.

Certified Public Accountant David Pope, a member of the Wyoming Stable Token Commission, inquired about the implications of Wyoming obtaining a master account, including sovereign immunity concerns and staffing requirements. Long suggested that the master account management would be similar to managing the current state bank relationship. The committee also considered allowing SPDI banks to convert to state-chartered trusts.

The move by Wyoming legislators signifies a broader effort to assert state rights in the banking sector and protect local industries from federal regulatory pressures. As discussions continue, the potential for Wyoming to secure its own master account could lead to significant shifts in how banks and assets are managed within the state.

Cowboy State Daily Article


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