Federal Reserve Banks hold the power to authorize master accounts, which grants financial institutions direct access to the U.S. money supply. In response to a recent ruling by a Wyoming court that denied Custodia Bank’s right to a Federal Reserve master account, the digital asset bank has filed an appeal. This notice was submitted by Custodia’s legal team in the U.S. District Court for the District of Wyoming, marking the latest development in an ongoing dispute over the bank’s potential access to the central bank’s payment systems.
The granting of master accounts falls under the jurisdiction of the Federal Reserve Banks, as stated in a ruling made by Judge Scott Skavdahl in March. These master accounts provide financial institutions with the most direct means of accessing the U.S. money supply, as well as direct entry to the Fed’s payment systems. Those without master accounts may need to rely on partner banks that possess such accounts in order to access services.
According to the judge’s ruling last month, Custodia’s master account application was received by the Kansas City Fed in 2020. The company was founded by Caitlin Long, an experienced professional from Wall Street. In the spring of 2021, the Board of Governors of the Federal Reserve System expressed their desire to assume control over the decision-making process. Consequently, Custodia took legal action in 2022 by suing the Federal Reserve Board of Governors and the Federal Reserve Bank of Kansas City due to the delayed decision regarding its master account application. In January 2023, Custodia’s request for a master account was ultimately denied.
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