Donald Verrilli, the former U.S. Solicitor General from 2011 to 2016, has asserted in a legal document that there has been a concerted effort by federal authorities to systematically exclude the cryptocurrency industry from banking services.
In an amicus brief dated July 3, submitted to the U.S. Tenth Circuit Court of Appeals, Verrilli advocated on behalf of the Blockchain Association, supporting Custodia Bank’s appeal. This followed a March ruling by the U.S. District Court for the District of Wyoming, which led Custodia to challenge the Federal Reserve’s refusal to grant the bank a master account.
**Case Background:**
Custodia sought a master account in October 2020 and initiated legal action against the Federal Reserve in June 2022, accusing it of unlawfully stalling the processing of its application. The Federal Reserve dismissed Custodia’s request in 2023, referencing the bank’s ties to the cryptocurrency sector in its rationale. In March 2024, a judge upheld the Federal Reserve’s stance, denying Custodia the chance for a review of its application.
Verrilli lamented in the July 3 document, “Regrettably, Custodia’s application became ensnared in the vigorous and unified push by federal regulators to marginalize the digital asset sector from mainstream banking.”
Source: PACER
Representing the Blockchain Association, Verrilli pointed to statements made in January 2023 by the Federal Reserve, Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency. These statements suggested that involvement with cryptocurrencies was likely at odds with prudent banking practices, leading to the Federal Reserve’s denial of Custodia’s master account application.
Verrilli noted further:
Several entities have submitted amicus briefs echoing support for Custodia’s appeal. Among them are former U.S. Senator Pat Toomey, Wyoming Secretary of State Chuck Gray, and members from both the U.S. Senate Banking Committee and the U.S. House Financial Services Committee. Paul Clement, another ex-U.S. Solicitor General, presented a brief on behalf of the Digital Chamber and Global Blockchain Business Council, indicating that Custodia had become unfavorable in the eyes of federal regulators.
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The timeline for the appellate court’s decision on Custodia’s appeal remains uncertain. The judges might also take into account a recent Supreme Court verdict from June 28 that overturned the Chevron doctrine. This landmark decision reversed the norm that mandated judicial deference to federal agencies’ legal interpretations, which could influence the Federal Reserve’s verdict regarding Custodia’s master account application.
On July 10, the U.S. House of Representatives is set to revisit a resolution aiming to annul an accounting regulation by the Securities and Exchange Commission, which has barred banks from engaging with cryptocurrencies. Although the resolution initially succeeded in both the House and Senate, it was vetoed by President Joe Biden in May. The House retains the ability to override the veto with a two-thirds majority.
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