Custodia Bank Fights FED Denial of Master Account in Appeals Court
The post Custodia Bank Fights FED Denial of Master Account in Appeals Court appeared first on Coinpedia Fintech News
Custodia Bank just cranked the heat up on a legal battle with the Federal Reserve. They’re appealing a Wyoming court decision that sided with the Fed, denying Custodia a master account – a key to accessing the big leagues of the banking system. This fight could have major ripple effects for cryptocurrency, and Custodia’s not backing down.
Will they win access? Read on to find out.
Challenging the Dual Banking System
In its opening brief, Custodia Bank challenges the Wyoming district court’s ruling, claiming that the Federal Reserve’s power to deny master accounts to state-chartered banks undermines the dual banking system. This system offers banks the choice between state or federal charters, promoting flexibility and competition in banking.
Citing Precedents
Custodia Bank’s legal team referenced the case Cantero v. Bank of America to emphasize the importance of maintaining parallel federal and state banking systems. The brief states, “The United States maintains a dual system of banking, made up of parallel federal and state banking systems,” highlighting the regulatory autonomy that states traditionally enjoy in banking matters.
Voices from the Top
Caitlin Long, CEO of Custodia Bank, and Appeals Attorney Michelle Kallen discussed the lawsuit against the Federal Reserve Board, asserting that the Fed and the Office of the Comptroller of the Currency (OCC) have unjustifiably denied the bank a master account. Long argues that the Federal Reserve has not adhered to legal requirements and has prematurely denied their request.
She also criticizes Senator Elizabeth Warren for her stance on debanking crypto, referencing Operation Choke Point 2.0.
THIS IS JUST NUTS–the Fed issues guidance today saying banks shouldn't lend out deposits made by their #crypto customers due to the liquidity risk & should hold cash to back the deposits instead, while simultaneously skewering @custodiabank for proposing to do just that.
— Caitlin Longhttps://t.co/ogSy5Pxh8w
(@CaitlinLong_) February 23, 2023
Legal Obligations
Custodia Bank contends that the Federal Reserve’s actions may violate the Monetary Control Act (MCA), a federal law mandating equal access to Federal Reserve services for all state-chartered banks. The bank’s attorneys point to specific language in the MCA. Here’s what it states –
“all Federal Reserve bank services…shall be available to non-member depository institutions.”
They argue that by denying Custodia Bank a master account, the Federal Reserve could be in violation of this law.
Crypto Impact
If Custodia Bank secures a master account, it could be a significant win for the cryptocurrency sector and other entities seeking similar accounts. CEO Caitlin Long has also predicted a strong bull market for Bitcoin before the upcoming U.S. election, despite a recent price dip.
Historically, Bitcoin tends to drop after halvings due to miner sell-offs, but Long expects a major price rally in October. Currently, Bitcoin is trading at $61,472, up 1%, with institutional buyers stepping in after a dip and a spot ETF attracting $31 million in new investments.
Keep an eye on this space as the legal battle unfolds. We’ll bring you the latest updates!
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