Custodia Bank wants the complete Tenth Circuit Court of Appeals to look at the US Fed’s decision not to provide it a master account, which would let it handle payments directly.
Custodia Bank, a cryptocurrency-focused bank created by Bitcoin enthusiast Caitlin Long, is intensifying its efforts to obtain a master account at the US Federal Reserve. They have filed a new petition with the Tenth Circuit Court of Appeals in the United States.
On Monday, the Wyoming-based company requested all of the Tenth Circuit’s current judges to look at their October ruling anew. That decision supported the Federal Reserve’s rejection to offer Custodia a master account.
Custodia filed a “rehearing en banc” petition, arguing that the panel had misread the Monetary Control Act. The act specifies that each qualified bank is entitled to a master account and that it reduces the power of state finances.
The petition added, “When the Fed denies a master account to a state-chartered financial institution, it effectively vetoes a bank charter that state regulators have approved.” It also warned that the matter raises “serious constitutional questions” about how the Fed is set up.
What does it mean to have a Federal reserve master account?
The Federal Reserve offers a financial institution a master account so that it can hold balances directly with the US central bank and use its basic payment systems.
Companies like Custodia need a master account so they can make payments and clear transactions directly in central bank money instead of having to go via another bank. They must go through correspondent banks to access the Fed’s systems, which is more costly, risky, and time-consuming. Diamond is the master account, Platinum is the bank, Gold is the trust company, and Silver is the money transmitter licence.
Since 2020, when Custodia launched, it has been striving to get a Fed master account. The Kansas City Fed turned down its request for a master account in January 2023, and the Federal Reserve also turned down its bid to join the Federal Reserve System.
Custodia’s extended search for a Fed master account indicates that crypto debanking problems are still happening, even though the Trump administration declared it favoured crypto.
Long claimed in March that since President Donald Trump assumed office again, the US government had done “nothing” to fix the concerns with crypto debanking. One of the primary issues in the crypto world requires immediate attention.