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Highlights
- Custodia Bank is not giving up in its fight against the Federal Reserve
- Court ruled against the firm's bid to open a Master Account
- This case is a major precedent setter for crypto banks
As promised, Custodia Bank has filed a notice of intent to appeal against a ruling from the court that affirmed the Federal Reserve’s rejection of its application for a master account.
US Federal Reserve Bags First Win
The Wyoming-based crypto bank made this Appeals move after stating that many financial institutions were discriminating against crypto businesses. For context, Wyoming District Judge Scott Skavdahl ruled in favour of the Federal Reserve last month against Custodia Bank concerning the access to Master Account and its compliance with the Administrative Procedure Act (APA).
In the judge’s opinion, it is well under the jurisdiction and discretion of the apex bank to reject Custodia’s bid for a master account. On the other hand, the court identified that the bank did not provide sufficient proof to support its claim that the Fed’s Board of Governors was illegally leaning on the Kansas City branch to reject the Custodia Bank’s bid for the master account which.
Noteworthy, if the master account request is granted, it would let Custodia Bank directly access the Fed and not need intermediary banks.
“Unless Federal Reserve Banks possess discretion to deny or reject a master account application, state chartering laws would be the only layer of insulation for the U.S. financial system,” Judge Scott Skavdahl wrote in March.
“And in that scenario, one can readily foresee a ‘race to the bottom’ among states and politicians to attract business by reducing state chartering burdens through lax legislation, allowing minimally regulated institutions to gain ready access to the central bank’s balances and Federal Reserve services.”
Mass Industry Support For Custodia Bank
After Custodia Bank filed for the master account, it felt that the Federal Reserve was taking too long to make a decision. This delay prompted Custodia to file its first suit against the Fed. It moved to refile the suit after the Fed formally denied its master account application.
Meanwhile, VanEck advisor Gabor Gurbacs agrees with Custodia Bank CEO Caitlin Long’s claims of banks discriminating against crypto businesses. He, therefore, urged policymakers to crackdown on these discriminatory practices by U.S. banks.
Similarly, Senator Cynthia Lummis has also voiced her dissatisfaction with the court’s ruling against Custodia, stressing the necessity to follow law passed by Congress for the issue of master accounts to Special Purpose Depository Institutions (SPDIs) in Wyoming.
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