Custodia Bank attempt to obtain a master account with the Federal Reserve was rejected by the US Court for the District of Wyoming.
The district US court has decided not to grant Custodia Bank a master account with the Federal Reserve. Additionally, the US court has rejected the digital asset bank’s request for a declaratory ruling.
Nevertheless, Custodia asserts that it is not showing any signs of retreating and is investigating every potential path. A spokeswoman for Custodia Bank said “We are discussing the court’s decision as well as all of our options, including appealing.”
US Court Supports Custodia Bank Case
On March 29, the United States District Court for the District of Wyoming received a document from Judge Scott Skavdahl rejecting Custodia’s attempt to obtain a master account from the Federal Reserve.
It is common practice to refer to this account as “a bank account for banks,” as it makes it easier for financial organizations to gain access to the payment systems maintained by the Federal Reserve.
Custodia said that if it did not have a master account, it would be unable to provide the same custodial services for crypto-assets as other banking institutions, which would put the bank at a disadvantage.
It contended that because Custodia does not have a master account, it is a second-class citizen, relegated to dependence on and devotion to an intermediary bank.
If Custodia can operate at all, it is a second-class citizen. Furthermore, Skavdahl asserted that Custodia lacks the authority to challenge the Federal Reserve Bank of Kansas City’s decision.
“Custodia is not entitled to its requested writ of mandamus compelling FRBKC to issue its master account, and summary judgment on Claim II must be granted in FRBKC’s favor.”
Custodia Bank had submitted an application for a master account with the Federal Reserve in October 2020. Should the Federal Reserve approve the application, the bank will gain access to the Fedwire network, which handled over 193 million transactions in the previous year.
Custodia submitted a membership application to the Federal Reserve in January 2023. The reason was that the company’s presence in the cryptocurrency field was “inconsistent with the required factors under the law.”
At the time, Custodia was one of the first Special Purpose Depository Institutions (SPDIs) in Wyoming. People also refer to these institutions as “blockchain banks.”
Because of their interactions with cryptocurrency firms that were unable to obtain banking services from the Federal Deposit Insurance Corporation were able to receive assistance from the establishment of SPDIs.
