Custodia Bank’s Appeal Denied In Battle Over Fed Master Account – Details
Custodia Bank, the popular crypto bank founded by Caitlin Long, has suffered another court setback in its fight for a Federal Reserve master account. Notably, the Wyoming-based institution failed to secure a favorable appeal ruling after an initial court rejection in March 2024.
Appeals Court Upholds Fed Decision In Custodia Case
In 2020, Custodia Bank filed an application with the Federal Reserve Bank of Kansas City (FRBKC) seeking a master account, which would grant the crypto-focused institution direct access to the Federal Reserve’s payment system, allowing it to operate without relying on intermediary banks.
However, the application was rejected in 2023, with the FRBKC citing concerns over banking practices. This decision came after Custodia had already filed a lawsuit against the Federal Reserve in 2022, accusing the regulator of an “unlawful delay” in processing its application.
In March 2024, the popular crypto bank legally challenged the Fed’s decision, arguing that the central bank lacked the legal authority to deny its master account application. The bank also accused the Federal Reserve Board of Governors of possible collusion with the Kansas City Fed in orchestrating the rejection.
Judge Scott Skavdahl of the US District Court for the District of Wyoming dismissed Custodia’s claims, ruling that federal law does not mandate the Federal Reserve to grant a master account to every eligible institution. He affirmed that the Fed retains broad discretion in deciding whether to approve or deny such applications.
This ruling was followed by an appeal at the 10th Circuit Court of Appeals in April 2024. Nineteen months later, the Appellate court has now agreed with the lower court, upholding the Fed’s discretion in granting a master account or not, regardless of eligibility.
The ruling said:
What Next For Custodia?
In a response to the court ruling, Custodia has hinted at a potential petition for rehearing, citing a strong dissenting opinion by one of the appeals court judges.
The statement read:
At press time, the total crypto market cap remains valued at $3.68 trillion following a 2.65% gain.
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