A Wyoming court has ruled against Caitlin Long’s Custodia Bank, ruling that the lender is not entitled to a master account with the Federal Reserve.
In a summary judgment on March 29, Judge Scott W. Skavdahl ruled that Custodia Bank has no legal right to a master account and that no writ of mandamus will be granted to that effect.
Custodia had argued that the Federal Reserve Bank of Kansas City (FRBKC) should provide a master account just because it was eligible to apply for one. Meanwhile, the regulator argued that it has the power to reject requests at its discretion.
The judge concluded that the plain language of the specific law cited by Custodia supports FRBKC’s position. He noted that the law does not specify master accounts and does not require the Fed to provide them to every eligible depository institution.
Instead, the relevant part of the law is intended to ensure that certain services are available to member and non-member depositories, but not to every depository institution. The same article also establishes a schedule of equal compensation for both types of institutions.
Custodia cannot challenge
The judge also noted that the Board of Directors has not yet submitted a final decision on the case. Custodia Bank argued that a particular email – one in which the Board of Directors said there were “no issues” with FRBKC denying the account – qualifies as a final decision by the agency.
The Board successfully countered that the notice was merely a final agency decision to comply with Wyoming law and did not meet the legal test for a final agency decision.
According to the ruling, the court does not have jurisdiction to hear Custodia’s claims as the bank could not prove that the action was a final decision of the agency.
Custodia responds
This is evident from a statement by FOX Business reporter Eleanor Terret, spokesperson for Custodia Bank said the company will determine the next steps after reviewing the verdict.
The spokesperson added:
“Challenging the Fed’s strong-arm tactics has always been an uphill battle. but Custodia Bank remains true to our vision ….”
Custodia Bank describes itself as a digital asset payment and custody solution suitable for corporate customers.
While Custodia’s crypto activities are not related to the current master account case, the Fed identified its crypto focus as a concern in a related application seeking to join the Federal Reserve system.
The Board of Directors and the Federal Reserve Bank of Kansas City denied Custodia’s request for membership and a master account on January 27, 2023.