Custodia Bank’s request for a Federal Reserve master account and a declaratory judgment has been denied by the United States district court. However, Custodia remains determined and is exploring all available options.
“We are carefully reviewing the Court’s decision and considering all possibilities, including the option to appeal,” a spokesperson for Custodia Bank stated.
Judge Scott Skavdahl dismissed Custodia’s bid for a Federal Reserve master account in a filing submitted to the United States District Court of Wyoming on March 29. A Federal Reserve master account, often referred to as a “bank account for banks,” allows financial institutions to access the Federal Reserve’s payment systems.
Custodia argued that without a master account, it would be at a disadvantage compared to other banking institutions in providing custodial services for crypto-assets.
“Without a master account, Custodia would be a second-class citizen, dependent on and subservient to an intermediary bank,” Custodia stated.
Additionally, Skavdahl ruled that Custodia is not entitled to have the Federal Reserve Bank of Kansas City’s decision overturned.
Custodia applied for a Federal Reserve master account in October 2020. If approved, the account would grant the bank access to the Fedwire network, which processed over 193 million transactions last year.
However, in January 2023, the Fed rejected Custodia’s membership application, citing its involvement in the crypto space as inconsistent with the necessary requirements under the law.
Custodia was among the first Special Purpose Depository Institutions (SPDIs) established in Wyoming, also known as “blockchain banks.” SPDIs were created to assist businesses that could not obtain banking services from the Federal Deposit Insurance Corporation due to their involvement in crypto.
Source: Eleanor Terrett, United States District Court of Wyoming.