Custodia Bank’s plea for a Federal Reserve master account and a declaratory judgment has been denied by the United States district court. Despite this setback, Custodia remains determined and is considering all available options.
“We are carefully reviewing the court’s decision and exploring all possible avenues, including the possibility of an appeal,” stated a spokesperson for Custodia Bank in response to the ruling.
Judge Scott Skavdahl of the United States District Court of Wyoming dismissed Custodia’s request for a Federal Reserve master account in a filing on March 29. A Federal Reserve master account, often referred to as a “bank account for banks,” enables 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 treated as a second-class citizen, dependent on and subservient to an intermediary bank,” Custodia contended.
Additionally, Judge Skavdahl ruled that Custodia does not have the right to overturn the decision made by the Federal Reserve Bank of Kansas City.
Custodia had applied for a Federal Reserve master account in October 2020, which would have granted the bank access to the Fedwire network. The Fedwire network processed more than 193 million transactions last year.
However, in January 2023, Custodia’s application was rejected by the Federal Reserve due to its involvement in the crypto space, which was deemed inconsistent with the necessary legal requirements.
Custodia, as one of Wyoming’s first Special Purpose Depository Institutions (SPDIs), also known as “blockchain banks,” was established to assist businesses that were unable to obtain banking services from the Federal Deposit Insurance Corporation due to their engagement in crypto-related activities.