Custodia’s lawsuit claims that the bank’s approval process for a master account with the Federal Reserve, which would reduce costs and risks, was delayed in an “unlawful” manner. Now, Caitlin Long’s Bitcoin bank Custodia is suing the Federal Reserve.
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As per a Forbes article, Custodia, the bitcoin bank previously recognized as Avanti, is suing the Federal Reserve for “patently unlawful” delays in the bank’s request to become a “Master Account” underneath the central bank.
“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,” the lawsuit (read below) claims.
The Wyoming-chartered bank was recognized as a special purpose depository institution (SPDI) on October 28, 2020, which implies it may handle both conventional banking and bitcoin operations. Custodia also filed their master account application the next day.
“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.
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As per the lawsuit, a spokesperson from the Kansas City Fed notified Custodia in early 2021 that there were “no showstoppers” in the application, which had been determined to be complete.
The Wyoming charter was excellent news because Custodia had become the second crypto-bank in the United States after Kraken, but in order for Custodia to acquire the federal level by itself, it must go through the Fed.
Custodia today faces greater costs, counterparty and settlement credit concerns and argues it is losing its competitive edge as a result of being obliged to partner with a bank that already has a master account.
Custodia Bank’s representative Nathan Miller allegedly commented, “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,” Miller went on to say.
Custodia was formed in 2020 by Caitlin Long, a former Morgan Stanley employee, underneath the name Avanti Financial Group. For the state of Wyoming, Long assisted in the writing of some of the laws employed to govern these financial service businesses entering the bitcoin and larger cryptocurrency industry.
Read the document below: