Bitcoin bank Custodia is suing the Federal Reserve, claiming that the central bank “illegally” delayed its application for a master account.
Specifically, the bank is suing the Federal Reserve Bank of Kansas City and the Federal Reserve Board of Governors. After submitting its business plans in May 2020, Custodia says the Kansas City Fed confirmed that its master account application was completed in October 2020. However, once the main Federal Reserve got involved, the process stalled in spring 2021.
The suit claims that the Fed has a legal obligation to act within a year, but has instead been delayed by more than 19 months. According to the central bank’s own paperwork, it usually takes only five to seven days to process a master account application. The suit would force the Fed to process the application with the ideal resolution of approval. This would make Bitcoin Bank the first bank to have such a qualification.
“Through this lawsuit, Custodia seeks to ensure that its Federal Reserve Master Account application receives due treatment and due process guaranteed by both federal statute and the U.S. Constitution,” said Custodian Bank spokesman Nathan Miller. “Custodia has satisfied every applicable rule for this, and has proceeded by applying to become a Fed member bank.”
master account requirement
Founded in 2020 by Morgan Stanley veteran Caitlin Long, Custodia was chartered in Wyoming under a crypto-friendly law passed in 2019, which Long himself helped create.
The business seeks to provide accounts for crypto businesses by helping with payroll and taxes. Unlike other banks, which generate revenue primarily by lending, Custodia intends to do so by charging a fee for its services.
However, to do so, the bank would need a master account with the Fed. Alleging that a master account is “critical” to its core mission, it would allow them to “rapidly reduce its costs and bring new products and options to users of financial services”.
“This delay in processing Custodia’s master account application has resulted in substantial, ongoing injury to Custodia,” the suit claims. “The immediate hurt is that the delay has forced Custodia to postpone its single entry into the financial services market.”
If approved, a recently surfaced pro-cryptocurrency bill would bar federal banking agencies from delaying applications under existing law and require them to make a decision on all applications within one year.
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