Legal Setback for Custodia Bank in Bid for Federal Reserve Master Account
Custodia Bank suffered a legal setback as it lost its bid for a Federal Reserve master account following a court ruling against it. The decision delivers another blow to the crypto market, with industry giants facing significant hurdles in their legal cases with US authorities.
Why Custodia Lost Its Case
- Custodia filed a lawsuit against the Federal Reserve in June 2022 regarding delays in processing its master account application.
- After the Federal Reserve rejected the application, Custodia revised its claims citing undue influence from the Federal Reserve Board.
- Wyoming district judge Scott Skavdahl disagreed with Custodiaโs assertions, affirming the Federal Reserveโs discretion in granting or denying master account applications.
The Courtโs Ruling
In response to Custodiaโs claims, the court ruled:
- If Custodiaโs position was correct, every depository institution chartered under state laws would be entitled to a master account.
- The judge dismissed Custodiaโs attempt to compel approval of its master account application.
- Skavdahl stated Custodia failed to prove that the Federal Reserve violated the Administrative Procedure Act.
Outcome and Response
Despite the setback, the ruling adds to the challenges faced by the crypto industry, with stakeholders describing it as a win for Operation Chokepoint 2.0. Custodia is considering appealing the judgment, reaffirming its commitment to creating a safe, tech-enabled bank.
Reactions to the Ruling
- US Senator Cynthia Lummis voiced her disagreement with the ruling, urging the Federal Reserve to adhere to established laws.
- Lummis emphasized the importance of granting Special Purpose Depository Institutions in Wyoming access to master accounts.
Custodiaโs Future Actions
In response to the ruling, a spokesperson for Custodia Bank stated:
- The bank is reviewing the Courtโs decision and considering all options, including a possible appeal.
- Custodia remains committed to its vision of creating a safe, tech-enabled bank despite the challenges faced in challenging the Federal Reserveโs decision.
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