This case has undergone a lengthy five-year review. The U.S. Tenth Circuit Court of Appeals voted on the case, ultimately deciding to reject the request with a seven to three vote. This marks Custodia Bank's final attempt to secure a master account with the Federal Reserve. The court's ruling supports a previous decision, affirming the Federal Reserve's authority over its payment infrastructure.
The court ruling reinforces the Federal Reserve's authority
According to this ruling, the law does not require the Federal Reserve to automatically approve master account applications. The ruling emphasizes the Reserve Bank's power to assess potential risks before granting access to institutions. Regulators previously denied Custodia Bank's application due to its banking model involving digital assets, citing that activities related to cryptocurrencies could pose risks to the stability of the financial sector and related institutions. This ruling further solidifies the Federal Reserve's role as a gatekeeper for institutions seeking access to the national payment system.
Dissenting judges emphasized the importance of master accounts
As this ruling is issued, cryptocurrency companies are actively seeking greater access to the U.S. traditional financial system. The crypto industry believes they may gain direct payment access, thereby reducing reliance on traditional banking partners. However, the court ruled that relevant authorities have the power to decide on applications from crypto banks.
Related crypto news: The CLARITY Act may not pass until April, Senate leader John Thune stated.