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Legal Ruling Against Custodia Bank
A recent court ruling in Wyoming has delivered unfavorable news to Custodia Bank, led by Caitlin Long, by determining that the lender does not hold a statutory entitlement to a Federal Reserve master account. The ruling, delivered on March 29 by Judge Scott W. Skavdahl, denied Custodia Bank’s plea for a writ of mandamus that would grant them access to a master account.
Legal Interpretation
Custodia Bank had argued that since they met the eligibility criteria, the Federal Reserve Bank of Kansas City (FRBKC) was obligated to provide them with a master account. However, Judge Skavdahl’s interpretation of the law indicated otherwise. He pointed out that the legislation referenced by Custodia does not explicitly mention the provision of master accounts to all eligible depository institutions.
While the law ensures the availability of certain services to depository institutions, it does not mandate the Federal Reserve to provide master accounts to every institution. Additionally, the law stipulates an equal fee schedule for both member and non-member depository institutions, further reinforcing the lack of a specific entitlement to a master account.
Challenging the Decision
Despite Custodia Bank’s contention that a previous email from the Board of Governors constituted a final agency decision supporting FRBKC’s denial of the account, the court found this argument insufficient. The absence of a formal final agency decision from the Board of Governors limited the court’s jurisdiction to address Custodia’s claims.
In response to the ruling, a spokesperson for Custodia Bank expressed the company’s commitment to its vision, highlighting the challenges posed by contesting the Federal Reserve’s decisions. The spokesperson mentioned that Custodia Bank is evaluating its next steps following the judgment.
Corporate Background
Custodia Bank positions itself as a provider of digital asset payment and custody solutions tailored to business clients. While the ongoing legal dispute does not directly involve Custodia’s crypto activities, the Federal Reserve had raised concerns about the bank’s crypto focus in a previous application for membership in the Federal Reserve system.
In January 2023, the Board of Governors and the Federal Reserve Bank of Kansas City rejected Custodia’s application for membership and denied them a master account, citing unspecified reasons related to the bank’s involvement in the crypto sector.
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