Coin Edition -
- A judge in the U.S. ruled against Custodia Bank in its lawsuit against the Federal Reserve.
- Custodia Bank filed against the Fed after the latter denied its application for a master account.
- The judge ruled that Custodia failed to challenge a final agency action, as required under the APA (Claim I).
A judge in the U.S. District Court of the District of Wyoming ruled against Custodia Bank in its lawsuit against the Federal Reserve. The bank had filed to challenge the denial of its application for a master account by the Federal Reserve Board of Governors and the Federal Reserve Bank of Kansas City (FRBKC).
In Friday’s ruling, Chief Judge Scott Skavdahl of the U.S. District Court for the District of Wyoming ruled in favor of the board. The board had argued that it had the power under law to deny the application over questions about how Custodia Bank would operate while providing custodial services for digital assets.
In addition, the Judge denied claims by Custodia Bank that the Fed did not follow appropriate administrative procedures.
Reacting to the Judges decision, Nathan Millar, Custodia Bank spokesperson, noted it has always been an uphill battle to challenge the Fed’s “strong arm” tactics. However, he highlighted Custodia’s commitment to creating a safe, tech-enabled bank. Millar noted that Custodia is reviewing the Court’s decision and all other options, including appeal.
Friday’s judgment concludes a case involving a filing by Custodia in January 2023, following a denial by the Fed and the Kansas City Fed of its application for a master account. The bank contended the FRBKC was statutorily required to grant the master account request, claiming that the Federal Reserve Board of Governors hijacked FRBKC’s consideration of the request and forced FRBKC to improperly deny the master account.
The Fed denied the master account, casting doubts on Custodia Bank Officers’ qualifications. The regulator also cited the bank’s financial status and the ability of the state of Wyoming to properly regulate financial institutions that serve as custodians for digital assets.
In his judgment, Skavdahl ruled that Custodia failed to challenge a final agency action, as required under the APA (Claim I). He also ruled that contrary to Custodia’s other claim, “relevant statutes establish that the Federal Reserve Banks possess the discretion to grant or deny master account requests.”
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