Custodia Gets A Court Blow And Denied Fed Access


Cheyenne, Wyoming, Tuesday, April 9, 2024 – A federal judge has ruled against Custodia Bank in its lawsuit challenging the Federal Reserve’s rejection of its application for a master account. 1

In 2022, Custodia Bank filed a lawsuit against the central bank for procrastinating its decision regarding acquiring a master account. On Friday, March 29 a judge ruled that the Federal Reserve is not obligated to grant the bank access to a master account.

Master accounts grant depository institutions direct access to the Federal Reserve system, bypassing intermediary banks.

Custodia, a crypto-focused bank, sued the Fed in June 2022, arguing that the Kansas City Fed (FRBKC) took too long to decide on its application. 2

The lawsuit was amended in February 2024 after the Fed formally denied Custodia’s request. The amended complaint contended that the Fed’s board improperly directed the FRBKC to reject the application and that the Fed lacked the authority to deny applications from non-member banks. However, Judge Richard Skavdahl disagreed.

In his ruling, he wrote that the law doesn’t require the Fed to grant master account access, and evidence suggests the FRBKC, not the board, made the final decision.3

This decision is a setback for Custodia and other crypto institutions seeking direct access to the Fed. It reinforces the central bank’s control over the master account system and highlights the ongoing regulatory uncertainty surrounding cryptocurrency.

Sources
  1. finance.yahoo.com: https://sg.finance.yahoo.com/news/custodia-bank-loses-lawsuit-challenging-215848144.html[↩]
  2. storage.courtlistener.com: https://storage.courtlistener.com/recap/gov.uscourts.wyd.61107/gov.uscourts.wyd.61107.317.0.pdf[↩]
  3. dropbox.com: https://www.dropbox.com/scl/fi/e4eik55fl6gfapyb37ctc/show_temp-13.pdf?rlkey=2gh2k2o1emjsd7c4zvldbkq0p&dl=0[↩]
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