Digital asset bank Custodia is suing the Federal Reserve Bank of Kansas City for delaying a decision to grant it a master account.
Custodia claims the Federal Reserve has refused to act upon its application for a master account resulting in a 19-month delay.
If Custodia wins its suit or is granted a master account, it will be the first digital asset bank in the U.S. to secure one.
Custodia, a Wyoming-based digital assets bank founded by Caitlin Long, is suing the Kansas City branch of the Federal Reserve Bank for “unlawfully” delaying the decision to grant it a master account.
Custodia Fights the FedCaitlin Long’s “blockchain bank” has filed a suit against the Fed.
Digital asset bank Custodia brought a case against the Federal Reserve Bank of Kansas City Tuesday, accusing the central bank branch of shirking its legal obligation to act within a year on its own paperwork. Custodia alleges the Fed has “unlawfully” delayed the decision to grant it a master account by 19 months.
In a 44-page document presented to the United States District Court of Wyoming, Custodia claims the Federal Reserve has refused to act upon its application for a master account resulting in a 19-month delay. The suit states that per official Federal Reserve documentation, a master account decision should “ordinarily take 5-7 business days,” and that the processing delay had “clearly violated the 1-year statutory deadline for doing so.”
“Through this lawsuit, Custodia seeks to ensure that its Federal Reserve master account application receives the fair dealing and due process guaranteed to it by both federal statute and the U.S. Constitution,” explained Custodia spokesperson Nathan Miller in a statement. “Custodia has satisfied every rule applicable to it, and has gone beyond by applying to become a Fed member bank,” he said.
Custodia’s suit also stresses the importance of obtaining a master account, calling the decision to grant one “critical” to the bank’s business. Having an account at one of the twelve Federal Reserve Banks allows institutions direct access to the Federal Reserve’s payment systems and the ability to settle transactions with other participants using central bank money. In place of a master account, Custodia has had to partner with a correspondent bank with master account privileges, a decision it calls “a decidedly second-best and far more expensive alternative.”
Formerly known as Avanti Financial Group, Custodia is classed as a Special Purpose Depository Institution and was founded by long-time Bitcoin advocate Caitlin Long in 2020. The bank, incorporated under Wyoming state regulations that Long helped write, requires it to maintain custody of the crypto assets it holds. It is the second “blockchain bank” founded under the Wyoming regulations after the crypto exchange Kraken. In March 2021, Custodia raised $37 million from investors, including Binance.US, Coinbase Ventures, and Morgan Creek Digital, to help fund the bank’s launch.
If Custodia wins its suit or is granted a Fed master account, it will be the first digital asset bank in the U.S. to secure one. However, it appears the Fed is not taking the decision to grant Custodia a master account lightly. As the bank is attempting to incorporate the traditional financial system with cryptocurrencies like Bitcoin, the lawsuit—and the Fed’s reaction to it—will set a major precedent for future digital asset banks in the U.S.
Disclosure: At the time of writing the piece, the author owned ETH and several other cryptocurrencies.
The information on or accessed through this website is obtained from independent sources we believe to be accurate and reliable, but Decentral Media, Inc. makes no representation or warranty as to the timeliness, completeness, or accuracy of any information on or accessed through this website. Decentral Media, Inc. is not an investment advisor. We do not give personalized investment advice or other financial advice. The information on this website is subject to change without notice. Some or all of the information on this website may become outdated, or it may be or become incomplete or inaccurate. We may, but are not obligated to, update any outdated, incomplete, or inaccurate information.
You should never make an investment decision on an ICO, IEO, or other investment based on the information on this website, and you should never interpret or otherwise rely on any of the information on this website as investment advice. We strongly recommend that you consult a licensed investment advisor or other qualified financial professional if you are seeking investment advice on an ICO, IEO, or other investment. We do not accept compensation in any form for analyzing or reporting on any ICO, IEO, cryptocurrency, currency, tokenized sales, securities, or commodities.
See full terms and conditions.
Federal Reserve Bank of Boston, MIT Publish CBDC Research
Feb. 4, 2022
The Federal Reserve Bank of Boston and the Massachusetts Institute of Technology have published the results from Phase One of Project Hamilton, a multi-year collaborative research endeavor focused on CBDC…
How Wyoming Became a Crypto Hub
Wyoming is fast becoming the beacon for crypto adoption in America, having established a mature legal framework needed for the digital assets industry to flourish. Wyoming’s Lead in Crypto Regulation…
Wyoming State Regulators Approve Avanti, America’s 2nd Bitcoin B…
Avanti says that it has gained approval for its Wyoming-based cryptocurrency bank, as revealed in a new press release. Bank Approved Unanimously Avanti was first announced in February. Now, the…
Leave a Reply