Custodia Bank files notice of appeal in Federal Reserve case

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Custodia Bank filed a notice of appeal in its ongoing case against the US Federal Reserve on April 26.

The bank intends to appeal an earlier judgment that denied its entitlement to a Federal Reserve master account, a service that allows access to the central bank’s system without relying on intermediary banks.

Additionally, Custodia will appeal a bill of costs through which one of the defendants, the Federal Reserve Bank of Kansas City, seeks $25,728.25 related to deposition transcripts.

Custodia argued that the court should not handle costs until it decides on the appeal and said the same court denied costs in a similar case. It asserted that awarding costs early would “risk chilling future legitimate lawsuits” against the Federal Reserve.

Previous ruling

The court ruled on March 29 that Custodia Bank is not entitled to a Fed master account and denied a writ of mandamus that would have compelled the Kansas Fed to decide on its application. Custodia’s petition was subsequently dismissed for review.

The court ruled that banks are not entitled to a master account by law merely because they can apply for one. It also found that Custodia could not demonstrate that the Federal Reserve Board of Governors, made a final decision on the rejection.

The court also ruled that it lacked jurisdiction over Custodia’s complaint due to the lack of a final decision.

Custodia Bank, which specializes in crypto services and is not FDIC-insured, had argued that the Fed’s delay and ultimate denial of its application was arbitrary and capricious, violating the Administrative Procedure Act (APA). The act governs how federal agencies make and implement rules.

Following the court ruling, Custodia CEO Caitlin Long said the bank would appeal the decision in a FOX Business interview on April 2.

Long also stated that recent cases have provided the Federal Reserve with “unfettered discretion” to deny new master accounts and close existing accounts. She added that Custodia was not the only bank affected by such a denial of access.