Case Summary: Custodia Bank vs. Federal Reserve

A US appellate court has sided with the Federal Reserve, rejecting Custodia Bank's appeal for a master account. This decision reinforces the Fed's stance on the risks associated with crypto-focused financial institutions.

Details of the Court's Ruling

In a ruling delivered on Friday by the US Court of Appeals for the Tenth Circuit, the court affirmed a previous decision by a lower court in the District of Wyoming. Custodia Bank filed the appeal in April 2024 after the lower court had already ruled against granting them a Federal Reserve master account. This denial represents the latest challenge for the bank, which initially submitted its application in October 2020.

The Significance of a Master Account

Securing a Federal Reserve master account would have provided Custodia Bank with direct access to the US government's payments network and authorized financial institutions. Custodia initially sought access through the Federal Reserve Bank of Kansas City. However, the Fed rejected their application in 2023, citing potential risks that were deemed "inconsistent with safe and sound banking practices" due to the bank's focus on digital assets.

Custodia's Response and Next Steps

Following the release of the court's decision, Custodia stated on X that they are "actively considering" petitioning the appellate court for a rehearing. They noted a "strong dissent" within the court, which raised "serious Constitutional questions about the Federal Reserve." This dissent was authored by a judge involved in a similar case in the Ninth Circuit.

Custodia's Background and History

Founded in Wyoming by Caitlin Long under a state-level regulatory environment conducive to blockchain innovation, Avanti was among the pioneering "blockchain banks." The company rebranded as Custodia in 2022. Cointelegraph has reached out to Long for comments.