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The U.S. Federal Reserve warned Tuesday that the issuance of dollar-exchangeable cryptocurrencies by state-chartered banks is “highly likely” to breach safe-and-sound banking practices, in part because doing so could enable money laundering and other financial crimes.

“Such tokens could circulate continuously, quickly, pseudonymously and indefinitely among parties unknown to the issuing bank,” the Fed advised in a policy statement on Jan. 27, the same day the regulator denied an application by Custodia Bank, a “novel-charter” bank in Wyoming, to join the Federal Reserve System and thus access the federal digital-payments infrastructure.

Publishing the statement as a “final rule” Tuesday on the heels of rejecting Custodia’s application suggests the Fed will veto any plans by other state-chartered banks to develop and circulate their own cryptocurrencies.

The regulator further warned that banks—whether state- or national-chartered—do not have permission “to hold most crypto-assets, including Bitcoin and Ether, as principal, in any amount,” but can hold them in a custodial capacity “in a safe and sound manner and in compliance with consumer, anti-money-laundering and anti-terrorist financing laws.”