Custodia Bank Denied Federal Reserve Membership and Master Account

By: Eliza Bennet

A Wyoming court has delivered a judgment ruling that the digital asset payment and custody solution provider, Custodia Bank, is not entitled to a Federal Reserve master account. The court concluded that the bank has no statutory right to a master account and dismissed the petition for a writ of mandamus to acquire one.

Custodia argued that merely being eligible to apply for a master account from the Federal Reserve Bank of Kansas City (FRBKC) should warrant provision. However, the court and the regulator pointed out that the FRBKC has the discretionary power to reject requests.

The court acknowldged the law cited by Custodia doesn't mention master accounts or mandate the Federal Reserve to provide them to all eligible depository institutions. The jurisdiction to address Custodia's claims was denied by the court, citing inability to prove provability of the action as a final agency decision.

Custodia Bank stated that it will review and determine the next steps based on the judgement. Although the lawsuit is unrelated to the company's crypto activities, it is worth noting that the company's cryptocurrency involvement was highlighted as a concern for a related application to become a member of Federal Reserve system.