Updated: Jun 20, 2022
Custodia Bank, one of the first Special Purpose Depository Institutions (SPDIs), also known as “blockchain banks,” made under a Wyoming regulatory framework, has filed a lawsuit against the US Federal Reserve Board of Governors and the Federal Reserve Bank of Kansas City. (Read the full suit here.)
The suit claims the length of time taken to process its application for a Master account with The Federal Reserve has been excessive - resulting in both financial losses and delays in offering new services to its customers.
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.
A Federal Reserve master account allows banks to directly access the Federal Reserve and utilise the Federal Reserve System’s payment, clearing and settlement services.
A master account is critical to Custodia because it would provide direct access to the Fed without the need for intermediate institutions, allowing the bank to streamline its operations by providing a safe bridge between digital assets and the US dollar payment system.
If Custodia are successful in this lawsuit, it will be the first digital asset-native bank to receive a master account allowing it to sharply reduce its costs and bring new products and options to users of financial services.