Federal Judge Rejects Custodia Bank's Claim for Federal Reserve Master Account Access

According to CoinDesk, a federal judge has denied Wyoming-based Custodia Bank's motion for judgment, rejecting its argument that it is entitled to a Federal Reserve master account and membership with the Fed. Judge Scott Skavdahl of the District of Wyoming stated that federal laws do not require the nation's central bank to give every eligible depository institution access to its master account system. He also noted that the evidence provided did not suggest that the Federal Reserve Board of Governors influenced a regional branch of the Fed to deny Custodia's application for an account. Custodia sued the Fed in June 2022, claiming that the Federal Reserve Bank of Kansas City was taking too long to decide on its application for a master account. These accounts allow banks and depository institutions to directly access the Federal Reserve, rather than going through intermediary banks. Custodia amended its complaint against the Fed in February after the central bank rejected its application. In the amended complaint, Custodia argued that the Fed's board had unlawfully directed the Kansas City Fed to reject its application and that the Fed did not have the discretion to reject applications from nonmember depository institutions. In his order, Judge Skavdahl wrote that the law does not require the Fed to grant master account access to applicants and that the evidence leaned toward the Kansas City Fed making the decision, rather than the board of governors. Custodia spokesperson Nathan Miller said in a statement that the bank is reviewing the court's decision and all of its options, including appeal.