Custodia Bank has appealed against a court ruling that supported the Federal Reserve's decision to deny them a master account.
Custodia Bank has officially filed an appeal challenging a recent court decision that upheld the Federal Reserve's decision to deny the bank a master account. This legal move follows a judgment by Judge Scott Skavdahl of the District Court for the District of Wyoming, who last month ruled against Custodia's request for the account, which is essential for direct access to Federal Reserve services.
Custodia, a Wyoming-based bank, sought to obtain a master account from the Federal Reserve, which would allow the bank to utilize Federal Reserve services such as Fedwire and the Automated Clearing House (ACH) network. These services are critical for financial institutions to perform a wide range of banking activities, including electronic payments. In 2022, Fedwire alone processed around 196 million transfers, totaling more than $1 quadrillion.
The appeal was made to the United States Tenth Circuit Court of Appeals, as indicated by a court filing dated April 26. Custodia's pursuit of a master account began in October 2020 when it first applied to the Federal Reserve. After facing what it called an "unlawful delay," the bank sued the Fed in June 2022.
The bank's founder, Caitlin Long, is a prominent figure in the Bitcoin space and a former executive at Morgan Stanley. She established Custodia in 2020 with the goal of serving Bitcoin firms and facilitating transactions with the U.S. dollar.
The Federal Reserve rejected Custodia's application in 2023, stating that the bank's Bitcoin-related activities were "inconsistent with the required factors under the law." The court's ruling in March not only denied the account but also dismissed Custodia's plea for a declaratory judgment.
Custodia has argued that without a master account, it is unable to provide equivalent custodial services for digital assets as other banks, which directly affects its competitive edge in the market. Notably, several other U.S. banks, including the Bank of New York Mellon, offer digital asset custody services.
In addition to the appeal, Custodia is also challenging a bill of costs submitted by the Federal Reserve Bank of Kansas City. The bill seeks nearly $26,000 in deposition transcript costs, which Custodia contends should not be awarded at this stage of the legal process.
