A Wyoming court has determined that Custodia Bank, led by Caitlin Long, is not entitled to a Federal Reserve master account. The ruling was passed on March 29 by Judge Scott W. Skavdahl who found that Custodia Bank has no statutory entitlement to a master account and will not be granted a writ of mandamus for one.
Custodia Bank argued that the Federal Reserve Bank of Kansas City (FRBKC) should provide a master account simply because it was eligible to apply for one. The regulator, on the other hand, maintained that it has the authority to reject requests at its discretion.
The judge agreed with FRBKC’s stance, stating that the specific law Custodia cited does not explicitly mention master accounts or mandate the Fed to provide them to every eligible depository institution. The law is intended to ensure that certain services are available to member and non-member depository institutions, but not every such institution. It also establishes an equal fee schedule for both types of institutions.
Custodia’s Challenge
Judge Skavdahl also noted that the Board of Governors has not yet made a final agency decision on the matter. Custodia Bank argued that an email in which the Board of Governors expressed no issues with FRBKC denying the account qualifies as a final agency decision.
However, the Board of Governors successfully countered that the email was only designated a final agency decision to align with Wyoming law and did not meet the legal test for such a decision. According to the judgment, the court does not have the jurisdiction to address Custodia’s claims, as the bank could not prove that the action was a final agency decision.
Custodia Responds
Following the ruling, a spokesperson for Custodia Bank stated that the company will determine its next steps after reviewing the judgment. Despite the challenging situation, Custodia Bank remains committed to its vision. The spokesperson noted, “Challenging the Fed’s strong-arm tactics has always been an uphill battle, but Custodia Bank remains committed to our vision.”
Custodia Bank describes itself as a digital asset payment and custody solution that caters to business customers. While its crypto activities are unrelated to the current case about master accounts, the Fed previously identified Custodia’s focus on crypto as a concern in a related application through which it aimed to become a member of the Federal Reserve system.
The Board of Governors and the Federal Reserve Bank of Kansas City denied Custodia’s request for membership and a master account on January 27, 2023. The recent court ruling reinforces this decision, creating a challenging path forward for Custodia Bank.
