Custodia Bank’s Appeal for a Federal Reserve Master Account Denied
A U.S. appeals court has ruled against Custodia Bank, a Wyoming-based cryptocurrency-focused institution founded by former Morgan Stanley executive Caitlin Long, in its long-running battle for direct access to the Federal Reserve’s payments system. The decision marks the latest setback in Custodia’s five-year effort to obtain a Federal Reserve “master account,” a crucial gateway for direct participation in the U.S. banking system.
In a decision filed Friday, the U.S. Court of Appeals for the Tenth Circuit affirmed an earlier ruling by the District of Wyoming that sided with the Federal Reserve Board of Governors and the Federal Reserve Bank of Kansas City. The ruling effectively leaves the central bank’s decision intact and confirms that the Fed has broad discretion in deciding which financial institutions can access its payments infrastructure.
Tenth Circuit Upholds Fed’s Decision to Block Custodia’s Access to US Payments System
The three-judge panel, including District Judges Tymkovich, Ebel, and Rossman, affirmed the lower court’s conclusion that the Federal Reserve acted within its authority when it denied Custodia’s request. Custodia, formerly known as Avanti Bank, first applied for a master account in October 2020 after receiving a Special Purpose Depository Institution (SPDI) charter from the state of Wyoming.
Source: Court Listener
Why Won’t the Fed Grant Crypto Firms a Master Account?
A Federal Reserve master account would have allowed Custodia to connect directly to major US payment systems such as Fedwire and the Automated Clearing House (ACH). Such access allows banks to process transactions, hold reserves, and participate directly in monetary policy operations. These benefits are currently limited to regulated custodians.
Cryptocurrency-focused companies have long sought similar access to increase efficiency and reduce reliance on intermediary banks. However, the Federal Reserve has not yet approved any master account applications from crypto-native institutions. The central bank repeatedly cited the sector’s high volatility, the potential for fraud, and inadequate consumer protection as reasons for caution.
Source: Congress
The Custodia case has become a central point in the broader debate over how traditional banking regulation should be applied to crypto firms. Long has accused the Fed of double standards, arguing that large traditional banks receive preferential treatment while smaller innovators face “debanking.”
For more information, visit https://cryptonews.com/news/fed-crushes-caitlin-long-crypto-bank-master-account-appeal/
