Custodia Bank's Bid for Federal Reserve Master Account Rejected by Court

2 days ago7 min read

Custodia Bank has faced another legal setback in its multi-year effort to secure a master account from the Federal Reserve. A federal court has rejected the crypto-focused bank's latest challenge, upholding the Fed's previous decision to deny the application.This ruling represents a significant hurdle for Custodia, which requires master account access for direct transaction settlement with the central bank without relying on intermediary institutions. Founded by Caitlin Long following the 2008 financial crisis, Custodia proposed operating as a bank with 100% reserves, primarily in Bitcoin, distinguishing itself from traditional fractional-reserve banking models.The Federal Reserve had previously denied Custodia's membership application, citing concerns about the bank's novel business model and potential risks to the financial system. In its ruling, the court found that the Kansas City Fed had acted within its statutory authority when rejecting Custodia's application.The decision comes amid increased regulatory scrutiny of digital asset companies and represents a continuing challenge for crypto-native institutions seeking integration with the traditional banking system. Custodia's legal team expressed disappointment with the ruling and is evaluating potential next steps, including possible appeals.

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