Custodia Bank, the popular crypto bank founded by Caitlin Long, has suffered another court setback in its fight for a Federal Reserve master account. Notably, the Wyoming-based institution failed to secure a favorable appeal ruling after an initial court rejection in March 2024.
In 2020, Custodia Bank filed an application with the Federal Reserve Bank of Kansas City (FRBKC) seeking a master account, which would grant the crypto-focused institution direct access to the Federal Reserve’s payment system, allowing it to operate without relying on intermediary banks.
However, the application was rejected in 2023, with the FRBKC citing concerns over banking practices. This decision came after Custodia had already filed a lawsuit against the Federal Reserve in 2022, accusing the regulator of an “unlawful delay” in processing its application.
In March 2024, the popular crypto bank legally challenged the Fed’s decision, arguing that the central bank lacked the legal authority to deny its master account application. The bank also accused the Federal Reserve Board of Governors of possible collusion with the Kansas City Fed in orchestrating the rejection.
The ruling said:
We agree with the district court that “[t]he plain language of the relevant statutes can only reasonably be read to give the Federal Reserve Banks discretion in granting or denying requests for master accounts.” Custodia Bank, 728 F. Supp. 3d at 1245. Accordingly, we hold that Custodia is not statutorily and automatically entitled to a master account. We AFFIRM the district court’s judgment in favor of Defendants on all claims.
The statement read:
While we were hoping for a win at the Tenth Circuit today, we received the next best thing — a strong dissent. It raised serious Constitutional questions about the Federal Reserve and was written by a judge sitting by designation on the panel of a similar case in the Ninth Circuit. Including Judge Bacharach’s opinion in the Fourth Corner case, there’s now a 2–2 split on this question among Tenth Circuit judges (2–1 in Custodia’s favor among active Tenth Circuit judges). Custodia has an option to petition for a rehearing by the Tenth Circuit, and we are actively considering that.
At press time, the total crypto market cap remains valued at $3.68 trillion following a 2.65% gain.
