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Judge Sides with Federal Reserve in Custodia Bank Crypto Case

Judge Skavdahl rules in favor of the Federal Reserve, denying Custodia Bank's Master Account request in a crypto-banking case.
Judge Sides with Federal Reserve in Custodia Bank Crypto Case

Highlights

  • Fed's Master Account control affirmed in crypto-banking case.
  • Custodia Bank's APA claim dismissed, regulatory boundaries reinforced.
  • Custodia evaluates options after court upholds Fed's discretion in account denial.

In a ruling made by Wyoming District Judge Scott Skavdahl, the United States Federal Reserve has won a lawsuit against Custodia Bank concerning the access to Master Account and its compliance with the Administrative Procedure Act (APA).

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Federal Reserve Wins Against Custodia Bank

The ruling by Judge Skavdahl clears the air on the Federal Reserve’s discretion in granting the Master Accounts, which are fundamental to the bank’s access to the services offered by the Federal Reserve. 

In his ruling, Skavdhal was on the side of the Federal Reserve, whose decision whether to grant or deny such requests was to be upheld. The decision is critical as it supports the Federal Reserve’s refusal to grant Custodia Bank a Master Account.

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Claims and the Court’s Response

The lawsuit brought by Custodia Bank against the Federal Reserve included several main arguments, the most significant of which was the alleged breach of the APA. The bank argued that denial from the Federal Reserve was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law.” 

However, Judge Skavdahl ruled out this claim for the lack of jurisdiction to review the decision of the Fed. Moreover, Custodia’s request for a declaratory judgment was also refused, strengthening the position of the Federal Reserve.

This legal case attracted a lot of attention, particularly after the increased popularity of crypto and blockchain technology in banking. Moreover, Custodia Bank, headed by CEO Caitlin Long, has been at the forefront of integrating blockchain technology into traditional banking services.

Their application for a Master Account was viewed as a test of the Federal Reserve’s willingness to open up to cryptocurrency-friendly banks. The decision could affect a wider range of similar institutions that are trying to negotiate the waters of the regulatory system of the United States banking system.

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Custodia’s Continuing Commitment

In reaction to the ruling, a representative of Custodia Bank commented,

“Challenging the Fed’s strong-arm tactics has always been an uphill battle, but Custodia Bank remains committed to our vision of creating a safe, tech-enabled bank. We are reviewing the Court’s decision and all of our options.”

This statement is the manifestation of the continued determination of Custodia Bank to achieve its objectives within the legal framework and perhaps to appeal the decision.

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Kelvin Munene Murithi

Kelvin Munene is a crypto and finance journalist with over 5 years of experience, offering in-depth market analysis and expert commentary . With a Bachelor's degree in Journalism and Actuarial Science from Mount Kenya University, Kelvin is known for his meticulous research and strong writing skills, particularly in cryptocurrency, blockchain, and financial markets. His work has been featured across top industry publications such as Coingape, Cryptobasic, MetaNews, Cryptotimes, Coinedition, TheCoinrepublic, Cryptotale, and Analytics Insight among others, where he consistently provides timely updates and insightful content. Kelvin’s focus lies in uncovering emerging trends in the crypto space, delivering factual and data-driven analyses that help readers make informed decisions. His expertise extends across market cycles, technological innovations, and regulatory shifts that shape the crypto landscape. Beyond his professional achievements, Kelvin has a passion for chess, traveling, and exploring new adventures.

Why trust CoinGape: CoinGape has covered the cryptocurrency industry since 2017, aiming to provide informative insights to our readers. Our journalists and analysts bring years of experience in market analysis and blockchain technology to ensure factual accuracy and balanced reporting. By following our Editorial Policy, our writers verify every source, fact-check each story, rely on reputable sources, and attribute quotes and media correctly. We also follow a rigorous Review Methodology when evaluating exchanges and tools. From emerging blockchain projects and coin launches to industry events and technical developments, we cover all facets of the digital asset space with unwavering commitment to timely, relevant information.
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