Federal Reserve Banks are given authority over the granting of master accounts.
Financial institutions have the most direct access to the U.S money supply via these accounts.
Following last month’s ruling by a Wyoming court that Custodia Bank did not have the right to a Federal Reserve master account, the digital asset bank filed a notice of appeal on Friday.
As the latest development in a long-running dispute over the bank’s potential access to the central bank’s payment systems, the notice was filed by Custodia’s lawyers in the U.S. District Court for the District of Wyoming.
Pursue of Master Account
Federal Reserve Banks are given authority over the granting of master accounts, according to a March ruling made by Judge Scott Skavdahl. Financial institutions have the most direct access to the U.S. money supply via these master accounts, which also provide them direct access to the Fed’s payment systems.
In order to access services, those without master accounts are sometimes compelled to depend on partner banks that do have master accounts.
The judge said in a ruling last month:
“If Custodia’s position was correct, it would effectively mean that every depository institution chartered under the laws of a state, regardless of how soundly crafted, is entitled to a master account allowing it direct access to the federal financial system.”
The Kansas City Fed received Custodia’s master account application in 2020. The company was formed by Caitlin Long, a seasoned Wall Street professional. The Board of Governors of the Federal Reserve System wanted to assume control of the decision-making process in the spring of 2021.
After that, in 2022, Custodia took legal action by suing the Federal Reserve Board of Governors and the Federal Reserve Bank of Kansas City for their delayed decision about its master account application to the central bank. In January 2023, the request for a master account made by Custodia was subsequently declined.