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Custodia Bank, the popular crypto bank founded by Caitlin Long, has suffered another legal setback in its fight for a Federal Reserve primary account. Notably, the Wyoming-based institution failed to obtain a favorable appeal decision after an initial court rejection in March 2024.
Court of Appeal upholds Fed decision in Custodia case
In 2020, Custodia Bank filed an application with the Federal Reserve Bank of Kansas City (FRBKC) seeking a master account, which would grant the crypto-focused institution direct access to the Federal Reserve’s payment system, allowing it to operate without relying on intermediary banks.
However, the application was rejected in 2023, with the FRBKC citing concerns over banking practices. The move comes after Custodia already filed a lawsuit against the Federal Reserve in 2022, accusing the regulator of an “unlawful delay” in processing its request.
In March 2024, the popular crypto bank legally challenged the Fed’s decision, arguing that the central bank did not have the legal authority to deny its master account application. The bank also accused the Federal Reserve Board of Governors of possible collusion with the Kansas City Fed in orchestrating the rejection.
Judge Scott Skavdahl of the U.S. District Court for the District of Wyoming rejected Custodia’s requests, ruling that federal law does not require the Federal Reserve to grant a master account to each eligible institution. He said the Fed retains broad discretion in deciding whether to approve or deny such requests.
This decision was followed by an appeal to the 10th Circuit Court of Appeals in April 2024. Nineteen months later, the appeals court has now agreed with the lower court, upholding the Fed’s discretion whether to grant a principal account, regardless of eligibility.
The decision said:
We agree with the district court that ”
What future for guarding?
In response to the court’s decision, Custodia hinted at a possible request for a rehearing, citing a strong dissenting opinion from one of the appeals court judges.
The statement read:
While we were hoping for a victory on the Tenth Circuit today, we received the next best thing: strong dissent. It raised serious constitutional questions about the Federal Reserve and was written by a judge serving by designation on the panel of a similar case in the Ninth Circuit. Including Judge Bacharach’s opinion in the Fourth Corner case, there is now a 2-2 split on this issue among Tenth Circuit judges (2-1 in favor of Custodia among active Tenth Circuit judges). Custodia has the option to request a rehearing by the Tenth Circuit, and we are actively considering it.
At press time, the total crypto market cap remains valued at $3.68 trillion after a 2.65% gain.
Total crypto market cap valued at $3.67 trillion on daily chart | Source: TOTAL chart on Tradingview.com
Featured image from Fox Business, chart from Tradingview
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