The Wyoming-based digital assets bank Custodia files a lawsuit against the Kansas City branch of the Federal Reserve Bank for “unlawfully” delaying the decision to grant it a master account.
Custodia says that the Federal Reserve has failed to act on its request for a master account, leading to a 19-month wait, in the lawsuit filed in the United States District Court of Wyoming.
Custodia, formerly Avanti Financial Group, is a Special Purpose Depository Institution that was created in 2020 by long-time Bitcoin advocate and former Morgan Stanley managing director Caitlin Long.
The bank’s 44-page lawsuit similarly emphasizes the need of getting a master account, describing the decision as critical to the bank’s operations.
Institutions holding accounts at one of the Federal Reserve Banks have direct access to the Federal Reserve’s payment systems and can settle transactions with other parties using central bank money.
According to the lawsuit, a master account ruling should normally take 5-7 business days according to official Federal Reserve documentation, and the processing delay exceeded the 1-year statutory deadline for doing so.
The unusual delay in processing Custodia’s and Kraken’s master account application was due to the hugely precedential nature of granting crypto companies traditional banking powers, according to Federal Reserve Chairman Jerome Powell.
Custodia will become the first digital asset bank in the United States to get a master account if the Federal Reserve grants them one.
The Fed appears to be taking the decision to give Custodia a master account seriously. In January, Powell acknowledged that there were valid reasons for issuing a master account to Custodia or Kraken.
According to the lawsuit, a representative of the Kansas City Fed re-confirmed that Custodia was legally eligible for a master account as recently as March 22.
Custodia spokesperson Nathan Miller stated “Through this lawsuit, Custodia seeks to ensure that its Federal Reserve master account application receives the fair dealing and due process guaranteed to it by both federal statute and the U.S. Constitution.”
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