Custodia Bank, a digital asset bank, has been denied a Federal Reserve master account by the United States district court. The court also dismissed Custodia’s request for a declaratory judgment. However, Custodia remains determined and is exploring all available options.
“We are carefully reviewing the Court’s decision and considering all possible courses of action, including the possibility of an appeal,” a Custodia Bank spokesperson told Cointelegraph.
In a filing made on March 29 to the United States District Court of Wyoming, Judge Scott Skavdahl rejected Custodia’s attempt to obtain a Federal Reserve master account. This account, often referred to as “a bank account for banks,” allows financial institutions to access the Federal Reserve’s payment systems.
Custodia argued that without a master account, it would be unable to provide the same custodial services for crypto-assets as other banks, putting it at a disadvantage.
“Without a master account, if Custodia is able to operate at all, it is treated as a second-class citizen, dependent on and subservient to an intermediary bank,” the bank stated.
Additionally, Skavdahl ruled that Custodia does not have the right to overturn the decision made by the Federal Reserve Bank of Kansas City:
In October 2020, Custodia submitted an application for a Federal Reserve master account. If approved, this would grant the bank access to the Fedwire network, which processed more than 193 million transactions last year.
However, in January 2023, the Federal Reserve rejected Custodia’s application for membership, citing its involvement in the crypto space as “inconsistent with the required factors under the law.”
Custodia was one of the first Special Purpose Depository Institutions (SPDIs) in Wyoming, also known as “blockchain banks.” SPDIs were established to assist businesses that were unable to obtain banking services from the Federal Deposit Insurance Corporation due to their crypto-related activities.