July 19, 2024

Fed’s Approval of Numisma’s Master Account Sparks Debate Over Fairness and Insider Influence

The Federal Reserve’s recent decision to grant Numisma, a small bank based in Greenwich, Connecticut, conditional approval for a master account has sparked significant scrutiny and allegations of potential conflicts of interest and favoritism. Numisma’s approval provides it access to the Fed’s extensive lending and credit facilities, a rare privilege for state-chartered institutions.

Numisma, a private bank that describes itself as a “state-of-the art, tech-forward operating and service platform” and a “global distributor of U.S. banknotes,” has now joined an exclusive group of institutions with master accounts. These accounts enable banks to access the Fed’s liquidity facilities and payment services at wholesale prices. The significance of this approval is not only operational but also symbolic, as it represents an endorsement from the country’s top banking regulator.

The Controversy

Numisma’s co-founder, Randy Quarles, previously served as the vice chair of the Federal Reserve and governor during the Trump administration. This connection has raised questions about whether Quarles’ former role influenced the Fed’s decision. A Numisma spokesperson, however, vehemently denied any involvement of Quarles in the application process, stating that his name was never mentioned during discussions with the Federal Reserve.

Despite these assurances, the approval of Numisma’s master account stands out, especially as the Fed has denied most requests from similar Tier 3 institutions, which are state-regulated and lack Federal Deposit Insurance Corporation (FDIC) coverage. David Zaring, a professor at the University of Pennsylvania’s Wharton School of Business, noted that Numisma’s approval as one of only two Tier 3 institutions in recent years is unusual and raises concerns about potential insider advantages.

Historical Context and Comparisons

This situation brings to mind the case of former Fed vice chair nominee Sarah Bloom Raskin and the fintech bank Reserve Trust. Raskin was accused of using her influence to help Reserve Trust secure a master account in 2018, a decision that was later reversed. This precedent adds to the controversy surrounding Numisma’s approval, as critics question whether similar insider advantages played a role.

Caitlin Long, CEO of Custodia Bank, a Wyoming fintech bank that deals in cryptocurrency and was recently denied a master account, expressed her outrage on social media. She highlighted the inconsistency in the Fed’s decisions, pointing out that Custodia, which shares Numisma’s regulatory status, was denied despite having a 100% cash reserve and no FDIC insurance.

Crypto and Regulatory Concerns

Long’s comments underscore a broader tension between the Federal Reserve and cryptocurrency-related institutions. The recent failures of crypto firms such as FTX have heightened regulatory scrutiny, impacting banks like Custodia that engage with digital assets. George Selgin of the Cato Institute suggested that the Fed’s fear of cryptocurrency might have contributed to Custodia’s denial, rather than a lack of deposit insurance.

However, there are signs of a potential shift in Washington, D.C. The Securities and Exchange Commission (SEC) recently approved several ETFs tracking the price of Ethereum, and Congress passed a bill that could establish a regulatory framework for digital assets. Additionally, the presumed GOP presidential nominee, Donald Trump, has begun accepting campaign donations in cryptocurrency, signaling potential political support for the industry.


The Federal Reserve’s approval of Numisma’s master account raises critical questions about transparency and fairness in the allocation of these accounts. While Numisma insists that Randy Quarles had no involvement in its application, the historical context of similar cases and the unusual nature of this approval fuel ongoing speculation and debate. As the cryptocurrency industry continues to evolve and regulatory landscapes shift, the scrutiny on the Fed’s decision-making processes will likely intensify, underscoring the need for clear and consistent criteria in granting master accounts.


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