Custodia is not eligible to have a Fed master account. judge rules
The Federal Reserve does not have to give digital asset bank Custodia access to its master account, a judge ruled Friday.
U.S. District Court Judge Scott Skavdahl of Wyoming said the Federal Reserve has discretion on whether to grant a master account. Referee. The news was a blow to Custodia Bank. be sued In 2022, the Federal Reserve and the Federal Reserve Bank of Kansas City were accused of delaying decisions on applications for central bank master accounts.
corresponding master account This gives the institution direct access to the Fed’s clearing system and the most direct access to the U.S. money supply available to a financial institution. Those without a master account often have to rely on partner banks that do have a master account to provide services.
“If Custodia’s position is correct, it means that every depository institution chartered under state law, regardless of how soundly structured, is entitled to a master account with direct access to the federal financial system,” the judge said.
According to court documents, Custodia claims the Federal Reserve violated the Administrative Procedure Act and said its actions were “arbitrary, capricious, an abuse of discretion, and otherwise contrary to law.” Custodia asked a judge to force the board to issue a master account. APA Governs how federal agencies develop and issue rules.
The court rejected APA’s claims in part because the commission failed to take final action.
No master account
Custodia was not legally entitled to have a master account, the judge said.
“The real debate at the heart of this case is whether FRBKC should grant Custodia a master account because it is legally entitled to do so, or whether FRBKC has the discretion to deny Custodia’s application for a master account despite its qualifications,” the judge said. said.
Custodia submitted its application to the Kansas City Federal Reserve in 2020. In the spring of 2021, the Federal Reserve stepped in and sought control over the decision-making process.
Custodia’s master account request was denied in January 2023. Custodia did not immediately respond to a request for comment.
Custodia is a special purpose depository institution, a bank that is governed by Wyoming law and can accept and store deposits. However, according to Custodia, they cannot lend out “customer notional deposits” and must hold 100% of those deposits as reserves. Website.
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