Custodia Bank’s Bid for Federal Reserve Master Account Denied, Ponders Appeal

The United States District Court for the District of Wyoming recently made a decision against Custodia Bank, denying it a U.S. Federal Reserve master account and dismissing its request for a declaratory judgment.

Despite this setback, Custodia is determined to fight back and is considering all available options, including an appeal.

“We are reviewing the court’s decision and all of our options, including appeal,” said a spokesperson from Custodia Bank to Cointelegraph.

The rejection came through a ruling on March 29 by Judge Scott Skavdahl, who turned down Custodia’s effort to obtain a master account.

This type of account is crucial for financial institutions, granting them direct access to the Federal Reserve’s payment systems.

Custodia argued that being denied a master account would significantly impair its ability to provide custodial services for crypto-assets, likening its potential operational status without one to a “second-class citizen” dependent on intermediary banks.

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Judge Skavdahl also stated that Custodia does not have the right to compel the Federal Reserve Bank of Kansas City (FRBKC) to grant it a master account, favoring FRBKC with a summary judgment on this claim.

Custodia initially applied for a Federal Reserve master account in October 2020, aiming for access to the Fedwire network.

This network is vital for processing transactions, having handled over 193 million transactions in 2023 alone.

The Federal Reserve had earlier, in January 2023, denied Custodia’s membership application.

The denial was based on Custodia’s engagement with cryptocurrencies, which the Fed found to be inconsistent with the legal requirements for such an application.

Custodia Bank, as one of Wyoming’s pioneering Special Purpose Depository Institutions (SPDIs), sought to serve businesses involved with cryptocurrencies that struggled to obtain services from banks insured by the Federal Deposit Insurance Corporation due to their crypto dealings.

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