Special Purpose Depository Institution (SPDI)

A Special Purpose Depository Institution (SPDI) is a type of state bank chartered under the law of Wyoming in the United States, designed for businesses that accept deposits and provide custody and other services for digital assets. An SPDI may take deposits in US dollars and hold crypto assets for customers, but it may not make loans with customers' fiat deposits and must back those deposits fully with liquid assets. Its powers are narrower than those of a full-service lender, its bank charter is issued by the state rather than nationally, and neither FDIC coverage nor use of Federal Reserve services comes with it automatically.

The charter was created to give crypto businesses a bank-regulated home at a time when many conventional banks were unwilling to serve them, and to provide a clear legal framework for crypto custody by a bank.

Wyoming enacted the Special Purpose Depository Institutions Act in 2019 as part of a series of digital-asset laws. The Wyoming Division of Banking granted the first SPDI charter in 2020 to Kraken Financial, an affiliate of the Kraken crypto exchange, and shortly afterwards to Avanti Bank & Trust, later renamed Custodia Bank. Additional applications and charters followed in later years.

• Full reserve: an SPDI must hold unencumbered liquid assets, such as cash and short-term US government securities, valued at least equal to its fiat deposit liabilities. This is effectively a 100 percent reserve requirement.
• No fiat lending: it may not make loans with customer fiat deposits, which removes the maturity transformation that exposes ordinary banks to runs.
• Capital and contingency: it must meet minimum regulatory capital requirements set by the state and maintain a contingency account and recovery plan.
• Custody and services: it may provide custody, fiduciary and asset servicing for digital assets, facilitate payments, and in some cases issue stablecoin-type instruments as permitted by the state.
• Compliance: it is subject to the Bank Secrecy Act, anti-money laundering rules and examination by the state.

The main practical constraint on SPDIs is federal. Because they are not required to obtain insurance from the Federal Deposit Insurance Corporation, their deposits are generally not insured. To connect directly to payment systems such as Fedwire and hold reserves at the central bank, an institution needs a Federal Reserve master account, and access is decided by the Reserve Banks rather than guaranteed by a state charter. In 2023 the Federal Reserve denied Custodia Bank's application for membership in the Federal Reserve System and its master account request. Custodia challenged the master account decision in court, and a federal district court ruled against it in 2024. Without a master account, an SPDI must rely on a correspondent or sponsor bank for dollar payments, which reintroduces the dependency the charter was meant to reduce. For the US central bank, see the Federal Reserve regulator profile.

An SPDI differs from a full-service state or national bank in that it cannot lend customer fiat deposits, and from a trust company in that it is a depository institution that can accept deposits. It also differs from licensing regimes such as the New York BitLicense or state money transmitter licenses, which authorize specific activities rather than banking. The SPDI is an example of a digital-asset-native financial institution, and its full-reserve model has been compared with proposals for narrow banks and for tokenized deposits and fully backed stablecoins.

Supporters argue that the full-reserve structure makes SPDIs safer than conventional banks for holding customer cash, and that clear custody rules protect customers' digital assets. Federal regulators and other critics have expressed concern about the risks of crypto-related activities, the absence of federal deposit insurance and federal supervision, and the potential for novel institutions to obtain central bank access without equivalent oversight. As of the mid-2020s, the charter had attracted only a small number of institutions, and its long-term role depends largely on federal policy toward crypto banking. State bank supervisors coordinate on such questions through the Conference of State Bank Supervisors.

• Wyoming Division of Banking