Custodia Sues Federal Reserve over Delay in Master Account Approval

Caitlin Long’s crypto bank, Custodia has filed a lawsuit against the US Federal Reserve Board of Governors and the Federal Reserve Bank of Kansas City on Tuesday for an 'unlawful' delay in the decision for the approval of a master account.

A master account allows a bank to directly access the Federal reserves without the need for the services of an intermediary bank.

According to the lawsuit, the Fed’s documents specify that the decision for granting a master account usually takes 5 to 7 business days. However, Custodia’s application has now been pending for 19 months, and the Fed has “clearly violated the 1-year statutory deadline for doing so.”

Custodia, formerly known as Avanti Bank, was founded in 2020 and is headed by Caitlin Long. It is based in Wyoming and received approval under the Special Purpose Depository Institutions (SPDIs), becoming one of the first 'blockchain banks' under Wyoming's regulatory framework.

The purpose of the bank is to provide services to cryptocurrency companies and bridge the gap between crypto and fiats.

Additionally, the crypto bank accused the Fed of maintaining a 'standardless' process for grinding a master account and acting “in complete secrecy, whenever and however they choose.”

Interestingly, Custodia received a routing number from the American Bankers Association (ABA) in February which is often considered the stepping stone to becoming a Fed member. Routing numbers are used to identify banks for any transactional purpose.

“Through this lawsuit, Custodia seeks to ensure that its Federal Reserve master account application receives the fair dealing and due process guaranteed to it by both federal statute and the U.S. Constitution. Custodia has satisfied every rule applicable to it, and has gone beyond by applying to become a Fed member bank,” Nathan Miller, a spokesperson for Custodia Bank told the media.