Custodia Bank takes case to higher court after March setback

Custodia Bank is challenging a lower courts ruling in its battle for a Federal Reserve master account.

Custodia Bank has filed a notice of appeal with the United States Tenth Circuit Court of Appeals, challenging a lower courts decision from March denying its attempt to officially join the U.S. banking system.

According to an April 26 court filing, the bank is seeking a federal-level appeals court's review of a decision by Judge Scott Skavdahl of the District Court for the District of Wyoming. The decision dismissed Custodias request for a Federal Reserve master account in the United States.

Federal Reserve master accounts are accounts held by a financial institution directly with the Federal Reserve Bank. Having a master account gives banks access to Federal Reserve services such as Fedwire and the Automated Clearing House (ACH) network for electronic payments. In 2022, Fedwire processed approximately 196 million transfers, worth more than $1 quadrillion.

Custodia Bank notice of appeal. Source: Custodia Bank

Caitlin Long, a former executive at Morgan Stanley and an early Bitcoin proponent, founded the bank in 2020 to provide account services for crypto firms and act as a bridge to the United States dollar.

Custodia applied for a Federal Reserve master account in October 2020. Nearly two years later, in June 2022, the bank sued the Fed, alleging an “unlawful delay” in its application processing.

In 2023, the Fed rejected the membership application, noting that the banks involvement in the crypto space was “inconsistent with the required factors under the law.” Recently, on March 29, Judge Skavdahl ruled against granting the bank an account and dismissed its plea for a declaratory judgment.

Custodia Bank says that lacking a master account prevents it from providing the same custodial services for digital assets as other banks, limiting its competitiveness. Several banks in the U.S. offer custody of digital assets, such as the Bank of New York Mellon.

In a separate filing, the bank objects to a bill of costs submitted by the Federal Reserve Bank of Kansas City. The bill seeks reimbursement for $25,728.25 in deposition transcript costs. Custodia argues that these costs should not be awarded at this stage of the legal proceedings.