Court allows Custodia’s lawsuit against Fed for denying Master Account.

A U.S. district court has ruled that Custodia can continue its challenge against the Federal Reserve Bank of Kansas City’s decision to deny the bank access to Fed banking services. The court rejected a Fed motion to dismiss the case. However, the court also rejected Custodia’s request to be granted a master account and membership with the Fed. Custodia must continue its claims via normal channels. Patrick Toomey, a retired U.S. senator from Pennsylvania, tweeted about the decision. Toomey, along with the state of Wyoming, filed amicus briefs to support Custodia’s suit. The court declined to grant Custodia’s request because there was another avenue Custodia could pursue. The district court said Custodia’s claim that the Fed Board of Governors had weighed in on the decision was plausible. In October 2020, Custodia applied to the Kansas City Fed for a master account. Without such an account, banks can’t offer the same services as institutions with such accounts. In August of the next year, Custodia applied to the Fed Board of Governors for membership. Eighteen months later, in January 2023, Custodia was rejected in every single category the Fed assesses, partly because of its crypto friendliness and part because it was a state-chartered bank, not a nationally chartered one. The central bank claimed Custodia’s decision not to federally insure deposits and its dependence on a vibrant crypto market made it a danger to itself and its customers. Edited by Nikhilesh De.