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Wyoming-based Avanti Financial Group has filed an application to become a Member Bank of the Federal Reserve. This membership application is different from Avanti's prior application to obtain payment system access from the Federal Reserve via a master account, which Avanti filed in October 2020 and which remains pending. Avanti meets the requirements for both membership and payment system access, and with this latest application, Avanti becomes the first digital asset bank to seek formal regulation by the Federal Reserve in addition to its existing regulator, the Wyoming Division of Banking.

Wyoming recently awarded its second special-purpose depository institution (SPDI) charter to Avanti Bank. One of the most notable products that Avanti intends to offer is the "Avit" stablecoin "disruptor." Avanti Bank's Avit will be a tokenized, programmable US dollar. Becasue Avit will be issued by, and be a direct obligation of, a bank, making it an electronic version of a traditional bank note. This means the Avit can be used in software applications like other stablecoins but may be considered more reliable than traditional stablecoins because users can trust that the deposits backing the Avit are held in the same state chartered financial institution that issued the instrument. Critically, if the Avit is a bank note it is also exempt from regulation as a security by the SEC. One legal wrinkle is that Article 3 of the Uniform Commercial Code (UCC), which governs bank notes, has never before been directly extended to electronic negotiable instruments such as digital bank notes. Nevertheless, there is an argument that Article 3 provides the necessary legal framework for banks to issue a variety of electronic negotiable instruments, including digital certificates of deposits. One could argue that a bank issuing a product with features similar to a stablecoin is really just a new form of a traditional bank activity.

Avanti Financial Group, the crypto-focused bank backed by Caitlin Long, has announced the closure of a $5 million angel round. Avanti will focus its services only to an institutional client base and will provide payment, custody, securities, and commodities activities. The bank was registered in January and is in the process of applying for a bank charter.

The Wyoming State Banking Board voted 8-0 to grant Avanti Bank & Trust a bank charter. Avanti's approved business plan includes a tokenized U.S. dollar called Avit™*; custody services for digital assets as a "qualified custodian" under the Investment Advisers Act; API-based online banking services, where customer deposits must be 100% backed by reserves; and prime services for digital assets. Avanti plans to provide commercial accounts in early 2021 and other accounts with high minimum balance requirements soon thereafter. Avit will initially be issued on Liquid (a sidechain of the Bitcoin blockchain, in coordination with Blockstream) and Ethereum.

The Wyoming Division of Banking approved crypto-centric Avanti Financial Group's application for a bank charter, paving the way to opening for banking business as early as October 2020. Avanti also announced the Avit stablecoin, which supposedly offers more legal certainty than existing stablecoins because it will be issued under existing U.S. commercial laws. Avit will be programmable via Avanti's application programming interface (API). It is designed for use by institutional traders and corporate treasurers U.S. dollar payment settlement solutions do not suffer from the delayed settlement and chargeback issues of traditional payment solutions, or the legal, accounting and tax issues of stablecoins.

Wyoming-based Avanti Financial Group has changed its name to Custodia Bank, and announced plans to launch in Q2 with U.S. dollar deposit accounts for business customers, initially providing ACH and Fedwire services. Its post-launch roadmap includes digital asset custody, Avit™ (a payment instrument akin to a digital cashier's check) and prime services, facilitated by customer-facing APIs to enable the programmability of payments by customers.

The US Office of the Comptroller of the Currency (OCC) has has conditionally approved crypto-asset custodian Anchorage's application for a national trust charter, and the creation of Anchorage Digital Bank. With a banking charter, Anchorage can provide sub-custody services - like holding assets for a main custodian - for any financial institution. Anchorage is the first crypto company to receive a federal charter, though Kraken and Avanti have both received state charters for digital banking services in Wyoming. While the Wyoming charter enables both Kraken and Avanti to operate nationally, it comes with certain limitations. https://www.occ.gov/news-issuances/news-releases/2021/nr-occ-2021-6.html

Avit will be commercial bank money or programmable electronic cash, redeemable at par with a U.S. dollar issued by Avanti Bank. It's not a security token, or a digital representation of an investment that's expected to generate returns. Unlike cash, stablecoins are generally issued as intangible assets, which means they aren't physical or don't derive their value from contractual claims like stocks and bonds do. Because of this, they have uncertain legal enforceability. Most U.S.-issued stablecoins exist under Article 8 of the Uniform Commercial Code, which requires they have intermediaries.

Avanti Bank and Trust was formed to apply for a charter under Wyoming's new special purpose depository institution law. The law requires banks to be 100% reserved, because they are not allowed to lend. They are not FDIC insured, but they will be the first banks in the United States that will be permitted to custody crypto assets.

Avanti, a new crypto-asset bank to be based in US frontier state Wyoming, will take advantage of the state's potentially revolutionary new legal framework for the custody of clients' crypto assets. In contrast to hundreds of years of established practice in the global markets for banking and securities custody, Wyoming's laws emphasise that clients' assets cannot be reused without their consent.

Caitlin Long, a former Wall Street executive and blockchain legislation advocate, is taking steps to set up the first crypto-focused bank in the United States. Announced by Long on Twitter, the bank will be named Avanti, meaning "forward" in Italian. She is now preparing to apply for a special purpose depository institution (SPDI) charter with Wyoming's division of banking.

Avanti Bank & Trust CEO Caitlin Long has declared that the US regulatory crackdown on crypto "has begun." She predicted that authorities will not target crypto-assets directly, instead opting to go after "intermediaries" and "access points" for U.S. dollars into the sector. She also noted that July 13 marked the "key event" in which the comment period for the Federal Reserve's proposed payment system access guidelines ended. Caitlin emphasized the importance of ensuring crypto firms are able to gain direct access to Fed master accounts.

There is no reason at all why distributed ledger technology (DLT) should be any more suited than other technologies. In fact, there's is little reason why a CBDC should run on DLT at all, as shown in early implementations which took place long before the blockchain hype, like the Bank of Finland's Avanti smart card payment system in the 1990s). Irrespective of the exact design and implementation details, CBDC is about a power shift from the private sector (financial institutions) to the public sector (central banks). If implemented, it has the potential to fundamentally reshape our current monetary and financial systems, with implications not yet fully understood.

Crypto bank Custodia is suing the Federal Reserve Board and the Kansas City Fed charging they have "unlawfully" delayed for 19 months acting on its application for a master account with the Federal. The Wyoming-chartered  "special purpose depository institution'' says the master account would reduce its costs and is "vital" to its core mission of providing a bridge between digital assets and the U.S. dollar system. According to the suit, the Fed has a legal obligation to act within a year and the application was made in October 2020.