Crypto News– The Federal Reserve Board has taken action against Farmington State Bank, associated with FTX, mandating the bank’s cessation of operations due to undisclosed engagement in digital assets-related endeavors. This enforcement action, disclosed on Thursday, reveals that Farmington, operating under the alias Moonstone Bank, shifted towards a digital assets-oriented business model in 2022 without requisite notification and approval from regulatory supervisors.
FTX-Connected Farmington State Bank Faces Regulatory Action by Federal Authorities
The enforcement initiative, jointly orchestrated by the Federal Reserve Board and the Washington State Department of Financial Institutions, imposes specific constraints on the bank’s activities. Farmington, hailing from Washington state, is prohibited from conducting activities such as distributing dividends or capital, depleting cash reserves, and undertaking specific endeavors without explicit permission from supervisory entities.
In a prior agreement inked with the Reserve Bank upon becoming a bank holding company in 2020, Farmington pledged to abstain from “digital bank operations” and refrain from altering its business strategy. Nevertheless, the Federal Reserve Board contends that the bank, in collaboration with a third party, devised an IT infrastructure tailored to facilitate the issuance of stablecoins. The agreement allegedly stipulated that in exchange for supporting the minting and burning of specific stablecoins, the bank would receive 50% of associated fees.
Traditionally operating as a community lender with a single branch, Farmington State Bank had traditionally steered clear of digital assets-related activities in favor of conventional financial services. The pivot to a new approach coincided with FTX‘s sister company Alameda Research’s acquisition of an $11.5 million stake in the institution last year.
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