Court Denies Crypto Bank Custodia's Bid to Pry Master Account From Unwilling Fed

A federal appeals court in Denver has upheld the Federal Reserve's decision to deny crypto bank Custodia access to a master account. The ruling confirmed that eligibility alone does not guarantee access to such accounts, as the Fed has the discretion to deny requests based on perceived risks posed by crypto activities. The case highlights the broader tension between traditional banking regulations and the emerging crypto finance sector. Custodia, which operates under a Wyoming state charter, argued that its business model is compliant, yet the Kansas City Fed concluded that allowing it access could introduce undue risks to the banking system. The judgment included a 2-1 vote among judges, with the majority emphasizing the Fed's responsibility to protect the financial system. The sole dissenting judge asserted that existing statutes require the Fed to provide services to eligible entities, extending the discussion on the regulation of crypto banking. In light of the ruling, Custodia expressed interest in seeking a rehearing, potentially spurred by future changes in Federal Reserve leadership that might adopt a more accommodating stance toward crypto institutions.

Source 🔗