Custodia Bank’s lawsuit to secure a Federal Reserve master account survived a motion to dismiss, with a judge ruling that it stated a ‘plausible claim’ of interference by the Fed’s Board of Governors.
The crypto-friendly bank was also not granted immediate membership with the Federal Reserve, with the court saying Custodia could pursue membership through other channels. Thursday, rejecting a Fed motion to dismiss the case. Custodia, founded by Morgan Stanley veteran Caitlin Long in 2020, was designed to provide a bridge between digital assets and the U.S. dollar system
Custodia Bank will receive it’s day in court,” Patrick Toomey, retired U.S. senator from Pennsylvania, expressed his decision via twitter recently Toomey, along with the state of Wyoming, filed amicus briefs to support Custodia’s suit.
Although the court refused to grant Wyoming-based Custodia’s request, it said that it was only refuting the request because there was another avenue Custodia could pursue,
The district court expressed that if the Kansas City Fed had been alone in denying Custodia its master license, Custodia’s claim would fail. However, the court said Custodia’s claim that the Fed Board of Governors had weighed in on the decision was reasonable.
“The alleged occurrence of certain events, and the timing of those events, plausibly suggest the Board of Governors had at least some hand in controlling the outcome of Custodia’s master account application,” the court wrote in its ruling..
Meanwhile, 3 years ago Custodia applied to the Kansas City Fed for a master account. Without the account, banks can’t offer same same services. Previous year in the month of August, custodia applied to the Fed Board of Governors for membership, which would subject the bank to the Fed’s oversight and regulations. Earlier this year, Custodia was not permitted in every single category the Fed assesses, partly because of its crypto friendliness and part because it was a state-chartered bank, not a nationally chartered one.