US digital asset-focused bank Custodia has filed a lawsuit against the Federal Reserve (Fed) Board of Governors and the Federal Reserve Bank of Kansas City, accusing the two institutions of “unlawfully” delaying its application for a master account with the Fed for 19 months.
“Upon information and belief, the Kansas City Fed’s consideration and impending approval of Custodia’s application was derailed when, in spring 2021, the Board asserted control over the decision making process,” according to the lawsuit, which added:
“The result is that Defendants have failed to meaningfully consider – let alone decide – Custodia’s long-pending application.”
The bank claims that the sued institutions violated the one-year statutory deadline for processing its application, and also breached the schedule contained on the master account paperwork which states that such a decision should ordinarily take five to seven business days.
“Custodia’s application was submitted nearly 600 business days ago with no action,” says the June 7 lawsuit.
The bank requests that the court orders a “speedy hearing on this action”, declares unlawful the continuing delay in processing Custodia’s application for a Fed master account, and orders the two institutions “to process and decide Custodia’s application … within 30 days of the Court’s Order, or such other time as the Court deems reasonable”.
Custodia was established in 2020 by Caitlin Long, a former executive at Morgan Stanley, and initially operated under the name of Avanti. The bank says its objective is to provide its business customers with a full range of banking and financial services with a focus on digital assets. Custodia is a Wyoming-chartered special-purpose depository institution (SPDI).
“Wyoming law provides Custodia’s customers with clear legal title to their digital assets. The state’s property rights-oriented approach to digital asset laws makes Wyoming a customer-friendly jurisdiction for digital asset market participants,” according to the bank.