Wyoming Effort to Support Crypto-Focused Banks Set Back by Fed Concerns About Industry

livemint.com:

In early 2019, Wyoming enacted legislation authorizing the creation of state-chartered banks catering to firms doing business with bitcoin and other cryptocurrencies. The banks would serve as custodians of digital assets and take dollar deposits, forming a bridge between cryptocurrency and dollars for firms to make payroll and payments, or help realize crypto investment gains or losses. Four years later, the Cowboy State’s experiment with state-chartered crypto banking has gone slower than expected.

And it isn’t just because of last year’s cryptocurrency market crash and the collapse of crypto lenders and platforms. The Federal Reserve hasn’t approved any of Wyoming’s four new special-purpose depository institutions, or SPDIs, that have filed applications for so-called master accounts that would give them access to the Fed’s financial payment systems that handle $4 trillion a day, according to state and private banking officials. The Federal Reserve System’s board of governors sets guidelines for master accounts.

The 12 regional Fed banks make the decisions on the applications. The Kansas City Fed has oversight of Wyoming banks. Officials at the Kansas City Fed declined to comment.

About 9,300 banks and credit unions have Fed master accounts, which industry officials refer to as bank accounts for banks. They are considered a lifeblood for the SPDI, or “speedy," startups. Wyoming officials say that state-chartered banks under law should have the same access to master accounts as federally chartered banks.