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Custodia Bank Appeals Federal Reserve Ruling
Custodia Bank has taken legal action by filing a notice of appeal in its ongoing case against the US Federal Reserve. The bank is seeking to overturn an earlier judgment that denied its entitlement to a Federal Reserve master account.
Background of the Case
On March 29, the court ruled that Custodia Bank does not have the right to a Fed master account. Additionally, a writ of mandamus that would have compelled the Kansas Fed to decide on its application was denied. The court determined that banks are not automatically entitled to a master account under the law solely by applying for one. Furthermore, Custodia was unable to prove that the Federal Reserve Board of Governors had made a final decision on the rejection, leading to the dismissal of the petition for review due to lack of jurisdiction.
This ruling prompted Custodia to take legal action by appealing the decision. The bank is also challenging a bill of costs, initiated by the Federal Reserve Bank of Kansas City, which aims to collect $25,728.25 for deposition transcripts. Custodia argues that these costs should not be awarded until after the appeal has been decided. The bank expressed concerns that awarding costs prematurely could discourage future legitimate lawsuits against the Federal Reserve.
Custodia Bank’s Argument
Custodia Bank, a specialist in crypto services and not FDIC-insured, claims that the Fed’s delay and denial of its application were arbitrary and capricious, violating the Administrative Procedure Act (APA). This act governs the process by which federal agencies create and implement rules. In a FOX Business interview on April 2, Custodia CEO Caitlin Long emphasized the impact of recent cases that have given the Federal Reserve broad discretion to reject new master account applications and close existing accounts. Long highlighted that Custodia is not the only institution affected by these actions.
With its appeal, Custodia Bank aims to challenge the previous court ruling and assert its stance on the entitlement to a Federal Reserve master account. The outcome of this appeal could have significant implications not only for Custodia Bank but also for other financial institutions seeking access to the central bank’s system.
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