Custodia's Bid for Federal Reserve Master Account Denied by US District Court
Summary:
The US district court has denied digital asset bank Custodia's request for a Federal Reserve master account, putting a strain on its ability to offer competitive crypto-custodial services. The court also dismissed Custodia's call for a declaratory judgment. Despite this setback, Custodia remains committed to exploring its options, including a potential appeal. The bank, one of Wyoming’s first Special Purpose Depository Institutions or “blockchain banks," had its federal membership application rejected due to its cryptocurrency ventures.
The United States district court has denied Custodia Bank's request for a Federal Reserve master account while also dismissing the cryptocurrency bank's call for a declaratory judgment. Nevertheless, Custodia maintains a strong resolve, with plans to explore all viable options. "We're currently examining the court's ruling and all potential courses of action, including the possibility of an appeal," said a Custodia Bank representative.
Custodia's attempt to secure a Federal Reserve master account, often dubbed "the bank account for banks," was brushed off by Judge Scott Skavdahl in a filing dated March 29, submitted to the US District Court of Wyoming. The master account provides banks with unfettered access to the Federal Reserve’s payment systems.
Custodia argued that without such a master account, it would fail to offer comparable cryptocurrency custodial services, thus putting the bank at a disadvantage. The bank stated that its operations would be significantly hindered and seen as inferior without a master account, forcing Custodia to rely on and be beholden to an intermediary bank.
In addition, Skavdahl ruled that Custodia does not merit the reversal of the decision made by the Federal Reserve Bank of Kansas City. He concluded that Custodia isn't justified in its request for a writ of mandamus, which would compel FRBKC to issue its master account.
Related: ‘Key responsibilities’ include CBDCs, Federal Reserve reports to Congress
In October 2020, Custodia had applied for a Federal Reserve master account, which if approved, would've granted them access to the Fedwire network. This network processed over 193 million transactions the previous year. However, in January 2023, the Federal Reserve rejected Custodia's membership application due to its engagements in the volatile cryptocurrency sphere, which it deemed "contradictory to the legally required factors."
One of the first Special Purpose Depository Institutions (SPDIs) in Wyoming was Custodia. These SPDIs, also known as “crypto banks," were created to assist businesses that were unable to secure Federal Deposit Insurance Corporation banking services owing to their crypto-related transactions. MAGAZINE: Crypto's Artificial Superintelligence Alliance leading the charge in developing 'beneficial' AGI.
Published At
3/30/2024 4:01:49 AM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.