– US Court Affirms Fed’s Authority to Deny Custodia Master Account – Federal Reserve Wins Ruling Against Crypto Bank Custodia – Tenth Circuit Upholds Fed’s Discretion in Custodia Master Account Case
The US Court of Appeals for the Tenth Circuit ruled against Custodia Bank, affirming the Federal Reserve's authority to deny its application for a master account. The decision supports the Federal Reserve Board of Governors and the Federal Reserve Bank of Kansas City.
- The court confirmed that Federal Reserve Banks can reject master account applications from eligible institutions.
- Custodia argued that the Monetary Control Act's language mandates granting accounts, but the ruling found that Section 342 gives discretionary power to reserve banks.
- Master accounts enable banks to access the Federal Reserve’s payment systems directly.
- The dissenting opinion argued the language "shall be available" implies a mandatory obligation, raising concerns about executive authority.
- Custodia's application was denied due to risks associated with its crypto-focused business model.
Custodia CEO Caitlin Long founded the bank to serve digital asset companies under a Wyoming SPDI charter. State-chartered institutions like Custodia must apply individually for Fed access, unlike federally chartered banks. Custodia applied in October 2020 and sued the Fed in 2022 over delays.