- Bitcoin bank Custodia is suing the Federal Reserve for delays in the approval process to acquire a “Master Account.”
- Having a master account allows the bank access to greater capacity for products and services while significantly reducing costs.
- The process has been delayed 19 months and the Federal Reserve states that applicants are typically decided on within “5-7 business days.”
Custodia, the bitcoin bank formerly known as Avanti, is suing the Federal Reserve for “patently unlawful” delays towards the bank’s application to become a “Master Account,” under the central bank, according to a report from Forbes.
“For more than 19 months, Defendants [The Federal Reserve] have refused to act upon Custodia’s application for a master account with the Federal Reserve,” states the lawsuit.
On October 28, 2020 the Wyoming-chartered bank was successfully approved as a special purpose depository institution (SPDI), which means it can serve both traditional banking services and bitcoin transactions. The next day, Custodia simultaneously submitted its master account application.
“The delay also breaches the schedule contained on the master account paperwork itself, which provides that a master account decision ordinarily takes “5 – 7 business days,” the lawsuit continues.In early 2021, the lawsuit states a representative from the Kansas City Fed informed Custodia that there were “no showstoppers,” in the application, which was confirmed to be complete.
The charter obtained through Wyoming was great news as Custodia became the second crypto-bank in the U.S. behind Kraken, but in order for Custodia to reach the federal level on its own, it is required to go through the Fed.
Currently, Custodia has to endure higher costs, counterparty and settlement credit risks and claims it is losing its competitive advantage by being forced into partnership with an institution that does currently hold a master account.
“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 Bank’s spokesperson Nathan Miller reportedly stated.
Miller continued to say “Custodia has satisfied every rule applicable to it, and has gone beyond by applying to become a Fed member bank.”
Custodia was founded by former Morgan Stanley alumni Caitlin Long under the name Avanti Financial Group in 2020. Long helped write some of the legislation used to regulate these financial service entities entering the bitcoin and broader cryptocurrency space for the state of Wyoming.