Caitlin Long’s Custodia Bank Sues the Fed

Custodia, a Wyoming-based digital property financial institution based by Caitlin Lengthy, is suing the Kansas Metropolis department of the Federal Reserve Financial institution for “unlawfully” delaying the choice to grant it a grasp account.

Custodia Fights the Fed

Caitlin Lengthy’s “blockchain financial institution” has filed a go well with towards the Fed.

Digital asset financial institution Custodia introduced a case towards the Federal Reserve Financial institution of Kansas Metropolis Tuesday, accusing the central financial institution department of shirking its authorized obligation to behave inside a yr by itself paperwork. Custodia alleges the Fed has “unlawfully” delayed the choice to grant it a grasp account by 19 months.

In a 44-page document introduced to the US District Courtroom of Wyoming, Custodia claims the Federal Reserve has refused to behave upon its software for a grasp account leading to a 19-month delay. The go well with states that per official Federal Reserve documentation, a grasp account choice ought to “ordinarily take 5-7 enterprise days,” and that the processing delay had “clearly violated the 1-year statutory deadline for doing so.”

“By this lawsuit, Custodia seeks to make sure that its Federal Reserve grasp account software receives the truthful dealing and due course of assured to it by each federal statute and the U.S. Structure,” defined Custodia spokesperson Nathan Miller in an announcement. “Custodia has happy each rule relevant to it, and has gone past by making use of to grow to be a Fed member financial institution,” he stated.

Custodia’s go well with additionally stresses the significance of acquiring a grasp account, calling the choice to grant one “crucial” to the financial institution’s enterprise. Having an account at one of many twelve Federal Reserve Banks permits establishments direct entry to the Federal Reserve’s fee methods and the power to settle transactions with different members utilizing central financial institution cash. Rather than a grasp account, Custodia has needed to accomplice with a correspondent financial institution with grasp account privileges, a choice it calls “a decidedly second-best and much costlier various.”

Previously referred to as Avanti Monetary Group, Custodia is classed as a Particular Goal Depository Establishment and was based by long-time Bitcoin advocate Caitlin Lengthy in 2020. The financial institution, included below Wyoming state laws that Lengthy helped write, requires it to keep up custody of the crypto property it holds. It’s the second “blockchain financial institution” based below the Wyoming laws after the crypto change Kraken. In March 2021, Custodia raised $37 million from buyers, together with Binance.US, Coinbase Ventures, and Morgan Creek Digital, to assist fund the financial institution’s launch. 

If Custodia wins its go well with or is granted a Fed grasp account, will probably be the primary digital asset financial institution within the U.S. to safe one. Nevertheless, it seems the Fed will not be taking the choice to grant Custodia a grasp account flippantly. Because the financial institution is making an attempt to include the standard monetary system with cryptocurrencies like Bitcoin, the lawsuit—and the Fed’s response to it—will set a serious precedent for future digital asset banks within the U.S.

Disclosure: On the time of writing the piece, the writer owned ETH and several other different cryptocurrencies.