San Juan, Puerto Rico-based FV Bank International Inc. is on track to open a master account at the Federal Reserve Bank of New York to process payments for its digital asset customers, according to CEO Miles Paschini.
"We're in direct and constant communication with the Fed, and I believe that we'll be successful in the near future getting our Federal Reserve master account," Paschini said in an interview.
FV Bank is licensed by Puerto Rico's financial services regulator, the Office of the Commissioner of Financial Institutions, or OCIF, as an international financial entity, or IFE. It started operations in July 2020 as a depository institution, and in November, it launched a new business line to provide custody and settlement services for transactions involving digital assets.
FV Bank believes its eligibility for the Fed membership has been determined, and it has retained a routing transit number issued by the American Bankers Association, Paschini noted. It started the application process for the Fed master account over a year ago, he added.
The ABA only assigns transit numbers to chartered institutions eligible for a Fed master account, according to the ABA's website. But the assignment does not guarantee an approval from the Fed. Having received an ABA routing number in early 2022, Wyoming-chartered Custodia Bank Inc. is suing the Federal Reserve Board and the Federal Reserve Bank of Kansas City for allegedly delaying action on Custodia's application.
FV Bank's confidence in its application is grounded in the merits of its business and precedent cases, where other banks holding the same type of charter in Puerto Rico secured access to Fed master accounts, Paschini said. In comparison, Custodia Bank holds the novel charter as a special purpose depository institution, he added. The charter was created by the state of Wyoming in 2019 to address banking for digital assets.
Still, master account access is very complicated, and applications by IFEs engaging in virtual currency activities will be subject to enhanced scrutiny, according to Mark Chorazak, a partner at Shearman & Sterling advising financial institutions on regulatory matters.
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