WASHINGTON, D.C.— Dennis M. Kelleher, President, and CEO of Better Markets, released the following statement in connection with the Federal Reserve’s decision to deny Custodia Bank’s application to become a member of the Federal Reserve System:

“The unanimous decision today by the Federal Reserve (Fed) to deny Custodia Bank’s application to become a member of the Federal Reserve System is a huge win for financial stability and taxpayers.  The Fed is right that novel and untested crypto activities pose a significant threat to the safety and soundness of the banking system.  While it has not proved a valid legal use case in 14 years, crypto has proven itself invaluable to financial predators, money launderers, tax avoiders, terrorist financiers, narco-kingpins, and others engaged in egregious illegal and criminal activities.  Ensuring that banks are not involved in and do not facilitate such activities is and must remain a priority for the Fed, which this decision reflects.

“Equally important, the only reason crypto’s $2-plus trillion collapse over the last year has not caused a financial crisis, crash and taxpayer bailouts is because banking regulators have not allowed crypto to be interconnected with the banking system.  If it had been—if the Fed had allowed crypto banks like Custodia to become members of the Fed and de facto legitimized crypto—then crypto activities and related products would likely have been on the balance sheets of Fed regulated banks, including those which are systemically significant.  If the $2+ trillion in crypto losses had rippled through the banking system, those too-big-to-fail banks would have come under extreme stress and may well have failed, requiring the Fed to bail them out as happened in 2008 when the subprime mortgage market collapsed.  That didn’t happen because banking regulators stood up to enormous political and industry pressure and prioritized the safety and soundness of banks, as the decision did today.

“The crypto industry and its many allies will object to today’s decision and no doubt sue, but no one should forget that the Fed’s actions today are in the best interests of the banking system, the country, and Main Street taxpayers.”

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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org