According to a ruling by a judge this past Friday (March 29, 2024), the US Federal Reserve will not be required to provide Wyoming-based digital asset bank Custodia access to a master account.
Federal Reserve Banks are able to determine if they should issue master accounts, explained presiding Judge Scott Skavdahl in the US District Court in the District of Wyoming as part of the recent judgment.
This update is a significant setback for Custodia Bank, which filed a lawsuit against the Federal Reserve Board of Governors and the Federal Reserve Bank of Kansas City in 2022 for postponing a decision on its application to obtain a central bank master account.
This particular master account enables service providers with direct access to the Federal Reserve’s payments platforms and offers reliable access to the US’s money supply, which is provided to financial institutions.
Service providers that do not have master accounts are typically dependent on cooperation from partner banks with master accounts to offer services to clients.
The Judge stated that if Custodia’s position were correct, it would effectively “mean that every depository institution chartered under the laws of a state, regardless of how soundly crafted, is entitled to a master account allowing it direct access to the federal financial system.”
As mentioned in the official court document, Custodia had claimed that the Federal Reserve Board was violating the Administrative Procedures Act and noted that its actions are considered to be “arbitrary,” “capricious,” an “abuse of discretion,” or otherwise “not in accordance with the law.”
Custodia requested the Judge order the board to provide a master account. The APA is responsible for how federal agencies implement and apply rules. The court proceeded to confirm the APA claim since the board had not taken conclusive action.
Custodia Bank was founded by Caitlin Long, a Wall Street veteran and well-known advocate of the digital asset industry. She helped to create the regulatory environment in Wyoming which makes the state digital asset friendly.
