Custodia Bank submits appeal notice in Federal Reserve case

Custodia Bank, a financial institution focused on providing account services for crypto firms, has taken legal action by filing a notice of appeal with the United States Tenth Circuit Court of Appeals. The move comes in response to a decision made by Judge Scott Skavdahl of the District Court for the District of Wyoming in March, which denied Custodia Bank’s attempt to join the U.S. banking system officially.

According to an April 26 court filing, the bank seeks a federal-level appeals court’s review of a decision by Judge Scott Skavdahl of the District Court for the District of Wyoming. The decision dismissed Custodia’s request for a Federal Reserve master account in the United States.

Federal Reserve master accounts are a financial institution held directly with the Federal Reserve Bank. These accounts grant banks access to federal reserve services like Fedwire and the Automated Clearing House (ACH) network, which they use for electronic payments. Fedwire processed over 196 million transfers valued at over $1 quadrillion in 2022 alone.

Custodia Challenges Banking System

Caitlin Long, a former executive at Morgan Stanley and an early Bitcoin proponent, founded the bank in 2020. The bank aimed to provide account services for crypto firms and act as a bridge to the United States dollar. Custodia applied for a Federal Reserve master account in October 2020. Nearly two years later, in June 2022, the bank sued the Fed, alleging an “unlawful delay” in its application processing.

However, In 2023, the Fed rejected the bank’s membership application over its crypto involvement, inconsistent with legal requirements. On March 29, Judge Skavdahl recently ruled against granting the bank an account and dismissed its plea for a declaratory judgment.

Moreover, Custodia Bank expressed concern that it cannot provide custody services for digital assets like other U.S. banks. For instance, the Bank of New York Mellon provides such services. Custodia cited the absence of a master account as its inability to offer such services.

In addition to its appeal, Custodia Bank has objected to the bill of costs the Federal Reserve Bank of Kansas City tendered. They are seeking $25,728.25 as reimbursement for deposition transcript costs.  Custodia argued against delaying costs until the appeal decision, citing the same court’s denial of costs in a similar case. It asserted that awarding costs early would “risk chilling future legitimate lawsuits” against the Federal Reserve.

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