The US Federal Reserve rejected Custodia Bank’s application for a master account on January 27. Last week, it released a document explaining its reasoning for the rejection.

Like Kraken founder Jesse Powell, many fans of Custodia (formerly Avanti) praised its fully backed, non-fractional reserve banking application. However, almost no one spoke about Custodia’s shadowy plan to mint its own stablecoin with “implicit backing” from the Fed that would, according to regulators, add “a new, meaningful, volatile source of demand for Federal Reserve liabilities.”

Aside from Custodia’s founder Caitlin Long, the bank had no bigger cheerleader than Powell. Indeed, he tweeted his support for Custodia regularly. Listen to the article learn, unsurprisingly, he has a long history of supporting other shadowy stablecoins, especially Tether.

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