Custodia Financial institution, a crypto‑centered financial institution based by Bitcoin advocate Caitlin Lengthy, is doubling down on efforts to acquire a grasp account on the US Federal Reserve by submitting a brand new petition in the USA Courtroom of Appeals for the Tenth Circuit.
On Monday, the Wyoming-chartered firm filed a petition asking all energetic judges of the Tenth Circuit to rethink its October determination upholding the Federal Reserve’s denial of a grasp account for Custodia.
By the petition, formally termed a “rehearing en banc,” Custodia argued that the panel had misinterpret the Financial Management Act, which it asserts entitles any eligible financial institution to a grasp account, and in doing so, undermines state banking authority.
“When the Fed denies a grasp account to a state-chartered monetary establishment, it successfully vetoes a financial institution constitution that state regulators have authorized,” the petition famous, including that the problem raises “critical constitutional questions” in regards to the Fed’s construction.
Why is a Fed grasp account so essential?
Issued by the Fed, a grasp account is a key account that enables a monetary establishment to carry balances immediately with the US central financial institution and entry its core fee programs.
For corporations like Custodia, having a grasp account is essential, because it allows them to settle funds and clear transactions immediately in central financial institution cash, moderately than counting on one other financial institution as an middleman. With out it, they have to use correspondent banks to entry the Fed’s programs, which may add price, danger and delay.
“When it comes to tiers, a grasp account is Diamond, financial institution is Platinum, belief corporations are Gold and cash transmitter licenses are Silver,” Custodia Financial institution founder and CEO Lengthy stated in an X put up in July, including that Custodia and Kraken are the “solely two crypto corporations” which are banks.
Custodia has been making an attempt to get a Fed grasp account because it launched in 2020, however the Kansas Metropolis Fed denied its grasp account utility in January 2023, and the Federal Reserve additionally rejected its bid to turn into a member of the Federal Reserve System.
Associated: Crypto amongst sectors ‘debanked’ by 9 main banks: US regulator
Custodia’s lengthy battle for a Fed grasp account highlights ongoing crypto debanking points, though the Trump administration had expressed help for crypto.
In March, Lengthy stated the US authorities has completed “nothing” to handle crypto debanking points since President Donald Trump returned to workplace, highlighting one of many crypto business’s largest unresolved challenges.
