As a researcher with a background in financial regulation and experience working with crypto businesses, I find Custodia Bank’s decision to appeal the court ruling against its application for a master account at the Federal Reserve intriguing. The Wyoming-based bank has been vocal about the discrimination it faces from traditional financial institutions, and this case could set an important precedent for how crypto businesses are treated in the broader financial system.
I’ve made good on my word and filed an intention to appeal, as per plan, against the court decision upholding the Federal Reserve’s denial of Custodia Bank’s request for a master account.
US Federal Reserve Bags First Win
As a crypto investor, I’ve noticed that the Wyoming-based crypto bank, Custodia, has recently taken legal action following their claims of discrimination against crypto businesses by financial institutions. To provide some context, Judge Scott Skavdahl in the Wyoming District Court ruled in favor of the Federal Reserve last month regarding Custodia’s access to a Master Account and compliance with the Administrative Procedure Act (APA). In response to this decision, Custodia has made an appeal.
According to the judge’s perspective, the central bank has the authority and discretion, as seen fit, to deny Custodia’s application for a master account. Conversely, the court acknowledged that the bank failed to present compelling evidence to substantiate their allegation that the Federal Reserve’s Board of Governors inappropriately pressured the Kansas City branch into rejecting Custodia Bank’s application for the master account.
Significant consequence: If approved, the master account request allows Custodia Bank a direct connection to the Fed, eliminating the need for intermediary banks.
If Federal Reserve Banks don’t have the power to refuse or dismiss a request for a master account, then state chartering laws will be the sole protection for the U.S. financial system. (Judge Scott Skavdahl, March)
In such a situation, it is evident that there will be intense competition amongst states and their political leaders to draw businesses in by easing chartering requirements and enacting lenient legislation. Consequently, poorly regulated institutions would have unobstructed access to the balances of central banks and the benefits of Federal Reserve services.
Custodia Bank Gains Support From Top Entities
Following Custodia Bank’s submission of the master account application to the Federal Reserve, they grew impatient as a decision seemed unwarrantedly prolonged. This protracted wait led Custodia to initiate legal action against the Federal Reserve for the first time. After an official denial of their master account application by the Fed, they chose to refile the lawsuit.
Simultaneously, Gabor Gurbacs, an advisor at VanEck, aligns with Caitlin Long’s assertions that American banks are unfairly treating crypto businesses. Consequently, he advocates for regulatory action to put a stop to these prejudicial bank practices.
As a crypto investor, I can relate to Senator Cynthia Lummis’ perspective on the recent court ruling against Custodia. I believe it’s crucial for us to abide by the laws passed by Congress regarding the allocation of master accounts to Special Purpose Depository Institutions (SPDIs) in Wyoming. These institutions play a significant role in our crypto industry, and upholding the law is essential for maintaining trust and transparency within our community.
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2024-04-27 00:09