The Federal Reserve Board on Thursday announced that it has denied the request by Custodia Bank, Inc., of Cheyenne, Wyoming, for reconsideration of the Board’s decision last month on its application to be supervised by the Federal Reserve.

The Board previously concluded that the firm’s application as submitted was inconsistent with the required factors under the law. The Board’s rules permit an applicant to request that the Board reconsider its application decision.

Custodia is a special purpose depository institution, chartered by the state of Wyoming, which does not have federal deposit insurance. The firm proposed to engage in novel and untested crypto activities that include issuing a crypto asset on open, public and/or decentralized networks.

The Fed concluded that “the firm’s novel business model and proposed focus on crypto-assets presented significant safety and soundness risks”. The Board has previously made clear that such crypto activities are highly likely to be inconsistent with safe and sound banking practices.

The Board also found that Custodia’s risk management framework was insufficient to address concerns regarding the heightened risks associated with its proposed crypto activities, including its ability to mitigate money laundering and terrorism financing risks.