Wyoming Court Rules Against Custodia Bank in Federal Reserve Master Account Case
A Wyoming court has ruled against Custodia Bank by determining that the lender is not entitled to a Federal Reserve master account. Judge Scott W. Skavdahl found that Custodia Bank has no statutory entitlement to a master account and will not be granted a writ of mandamus for one.
Custodia had argued that the Federal Reserve Bank of Kansas City (FRBKC) must provide a master account merely because it was eligible to apply for one. However, the regulator argued that it has the authority to reject requests at its discretion.
The judge concluded that the law cited by Custodia does not mandate the Fed to provide master accounts to every eligible depository institution. Instead, the law is intended to ensure that certain services are available to member and non-member depository institutions, with an equal fee schedule for both types.
The court also noted that the Board of Governors has not yet issued a final agency decision on the matter. Custodia Bank claimed that an email from the Board of Governors saying it had “no issues” with FRBKC denying the account constituted a final agency decision. However, the Board of Governors successfully argued that the email did not meet the legal test for a final agency decision.
Custodia Bank responded to the ruling by stating that it will review the judgment before determining its next steps. The company remains committed to its vision, according to a spokesperson.
Custodia Bank describes itself as a digital asset payment and custody solution for business customers. While Custodia’s crypto activities are not directly related to the master account case, the Fed cited its crypto focus as a concern in a related application for membership in the Federal Reserve system, which was denied on Jan. 27, 2023.
