Custodia Bank claps back against court ruling on Fed account

Custodia Bank has filed a notice of appeal on April 26, challenging a lower court’s decision from March denying its attempt to officially join the U.S. banking system.

The Cheyenne, Wyoming-based bank is seeking a federal-level appeals court’s review of a decision by Judge Scott Skavdahl, who dismissed Custodia’s request for a Federal Reserve master account in the U.S.

A master account gives banks access to Federal Reserve services (i.e., the Automated Clearing House network for electronic payments).

Additionally, Custodia is appealing a bill of costs submitted by one of the defendants, the Federal Reserve Bank of Kansas City. The bill amounts to $25,728.25 for deposition transcripts.

Custodia argues that the decision on costs should be postponed until after the appeal is concluded, referencing a similar case where costs were not imposed at such an early stage.

On March 29, the court found that Custodia Bank was not entitled to a Fed master account and rejected a writ of mandamus, which would have required the Kansas Fed to deliberate on its application. Custodia’s petition was later dismissed for review.

The court concluded that banks are not legally entitled to master accounts simply because they can apply for them. It also determined that Custodia could not prove that the Federal Reserve Board of Governors made a final decision on the denial.

The court also ruled that it lacked jurisdiction over Custodia’s complaint due to the lack of a final decision.

Custodia Bank, known for its specialization in crypto services and lack of FDIC insurance, contended that the Federal Reserve’s prolonged delay and eventual denial of its application were arbitrary and violated the Administrative Procedure Act.

The act oversees the processes federal agencies must follow in rule-making and enforcement.

Following the court order, Custodia CEO Caitlin Long told FOX Business that the bank would appeal the decision.

Long also argued that previous decisions have given the Federal Reserve “unfettered discretion” to deny new master accounts and shut current ones. She further stated that Custodia was not the only bank impacted by such a denial of access.

As crypto.news reported earlier, on Nov. 7, Long announced the launch of Custodia’s Bitcoin custody platform after gaining approval from the Wyoming Division of Banking.

The service aims to cater to businesses like fiduciaries and fund managers, enhancing operational efficiency and reducing risk.