Bitcoin Bank Custodia Sues Federal Reserve, Demanding Decision On Master Account

Bitcoin bank Custodia today sued the Federal Reserve Board of Governors and the Federal Reserve Bank of Kansas City charging they have “unlawfully” delayed for 19 months acting on its application for a master account with the Federal Reserve.

The bank, chartered in Wyoming under a crypto-friendly statute passed in 2019 allowing for “special purpose depository institutions,’’ says the master account would reduce its costs and is “vital” to its core mission of providing a bridge between digital assets and the U.S. dollar system.

According to the suit, the Federal Reserve has a legal obligation to act within a year and states on its own paperwork that it ordinarily takes just five to seven days to act on a master account application. Custodia’s suit alleges the Kansas City Fed’s processing of its application was moving along until the Spring of 2021, when the main Federal Reserve got involved. The suit seeks to force the Federal Reserve and the Kansas City branch to act on its application–and ultimately, to approve it.

Should Custodia win its suit or otherwise be granted a master account, it would be the first bitcoin bank to gain one. As Central Banks around the world seek to merge the best innovation that bitcoin and other blockchain-powered currencies offer, with the best of central management, the lawsuit–and the Fed’s reaction to it–could help define the very future of banking.