- Bitcoin bank Custodia is suing the Federal Reserve for delaying the approval process for obtaining a “master account”.
- Having a master account allows a bank access to greater efficiencies for products and services while significantly reducing costs.
- The process has been delayed by 19 months and the Federal Reserve says applicants are typically settled within “5-7 business days.”
According to a report by Forbes, Custodia, the bitcoin bank formerly known as Avanti, is suing the Federal Reserve for “absolutely illegal” delays in the bank’s application to become a “master account” under the central bank. .
“For more than 19 months, the respondent [The Federal Reserve] has refused to act on Custodia’s application for a master account with the Federal Reserve,” the lawsuit states.
On October 28, 2020, Wyoming-Chartered Bank was successfully approved as a Special Purpose Depository Institution (SPDI), meaning it can serve both traditional banking services and bitcoin transactions. The next day, custodia simultaneously submitted its master account application.
“The delay also violates the schedule contained in the master account paperwork, which provides that a master account decision typically takes “5 – 7 business days,” the lawsuit continues.
In early 2021, the lawsuit states that a representative of the Kansas City Fed informed Custodia that there was “no showstopper” in the application, which was confirmed to be complete.
The charter received through Wyoming was great news as Custodia became the second crypto-bank in the US after Kraken, but in order for Custodia to reach the federal level on its own, it is required to go through the Fed.
Currently, Custodia faces high cost, counterparty and settlement credit risks and claims it is losing its competitive advantage by forcing it into a partnership with an entity that currently maintains a master account.
Custodian Bank spokesman Nathan Miller reportedly said, “Through this lawsuit, Custodia seeks to ensure that its Federal Reserve Master Account application receives the fair treatment and due process guaranteed by both federal statute and the U.S. Constitution.” Are.”
Miller continued to say “custodia has satisfied every rule applicable to it, and has proceeded by applying to become a Fed member bank.”
Custodia was founded in 2020 by Morgan Stanley alumnus Caitlin Long under the name Avanti Financial Group. Long helped write some of the laws used to regulate these financial services entities entering bitcoin and the wider cryptocurrency space for the state of Wyoming.