Donald Verrilli, who served as the solicitor general of the United States from 2011 to 2016, has asserted in an appellate filing that federal regulators have been conducting “aggressive, coordinated efforts to ‘debank’ the digital asset industry.”
In a July 3 amicus brief to the U.S. Tenth Circuit Court of Appeals, Verrilli represented the Blockchain Association in support of Custodia Bank’s appeal. Following a March decision by the U.S. District Court for the District of Wyoming, Custodia appealed to the Tenth Circuit, challenging the Federal Reserve’s denial of the bank’s access to a master account.
### Case Background
Custodia applied for a master account in October 2020 and subsequently filed a lawsuit against the central bank in June 2022, alleging the Fed’s “unlawful delay” in processing its application. The Federal Reserve ultimately rejected Custodia’s application in 2023, citing the bank’s involvement with the crypto industry. In March 2024, a judge upheld the Fed’s decision, preventing Custodia from having its application reviewed.
Verrilli stated in the July 3 filing, “Unfortunately for Custodia, its application was caught in the current of federal regulators’ aggressive, coordinated efforts to ‘debank’ the digital asset industry.”
Source: PACER
On behalf of the Blockchain Association, Verrilli referenced statements from January 2023 by the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency, which claimed that crypto was “highly likely to be inconsistent with safe and sound banking practices.” The Fed rejected Custodia’s application for a master account following this coordinated statement from federal regulators.
Verrilli noted that other interested parties have also filed amicus briefs supporting Custodia’s appeal, including former U.S. Senator Pat Toomey, Wyoming Secretary of State Chuck Gray, and members of both the U.S. Senate Banking Committee and the U.S. House Financial Services Committee. Paul Clement, another former U.S. Solicitor General, filed a brief for the Digital Chamber and Global Blockchain Business Council, stating that Custodia had fallen into “disfavor with federal regulators.”
### Related Developments
– The Basel Committee has finalized rules on crypto exposure for banks.
– The timeline for the appellate court’s decision on Custodia’s request remains uncertain. It is possible that the judges will consider the June 28 Supreme Court opinion overturning the Chevron doctrine in their decision. This recent ruling by the Supreme Court, which overturned the precedent requiring courts to defer to federal agencies’ interpretation of the law, could impact the Federal Reserve’s decision on Custodia’s master account application.
On July 10, the U.S. House of Representatives is set to reconsider a resolution to overturn a Securities and Exchange Commission accounting rule that has prevented banks from handling crypto. Despite initially passing in both the House and Senate, President Joe Biden vetoed the legislation in May. The House can override the veto with a two-thirds majority vote.
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