FEDERAL Reserve is Being Sued by Crypto Bank Custodia
According to the suit, Crypto Bank Custodia is seeking unspecified damages and a declaratory judgment that would compel the Fed to make a decision on its application. The bank argues that the Fed’s delay in making a decision violates the Administrative Procedures Act, which requires federal agencies to make a decision on applications within a reasonable time frame.
Crypto Bank Custodia claims that it has been waiting for over eight months for the Fed to make a decision on its application and that the delay has caused it to miss out on business opportunities and incur additional costs. The suit alleges that the Fed has failed to provide any justification for the delays, or even indicate when it expects to make a decision.
The lawsuit is just the latest development in the ongoing saga of Cryptocurrency Bank Custodia’s efforts to obtain a banking license from U.S. regulators. Caitlin Long is a veteran of Morgan Stanley, where she spent 21 years working in various capacities. She is now a blockchain and cryptocurrency advocate and is the Chairman, WyoHackathon. In 2018, she was named one of the most influential people in blockchain by Coindesk.
Long has been a vocal proponent of cryptocurrency and blockchain technology and has been working to promote their adoption in her home state of Wyoming. In 2019, she helped pass a bill that exempts cryptocurrencies from property taxes, making Wyoming the most crypto-friendly state in the US.
Long has been working with Wyoming lawmakers to create favorable regulations for cryptocurrency businesses, and she was recently appointed as co-chair of the Wyoming Blockchain Coalition.
Custodia claims that the Federal Reserve Board of Governors and Federal Reserve Bank of Kansas City have impeded its business by delaying the application process for a master account by 19 months. According to Custodia, this account is essential for its operations.
The company has alleged that the actions of the Fed have caused it significant financial losses and damage to its reputation. Custodian’s complaint argues that the Fed’s actions have prevented it from accessing critical banking services and created an unfair competitive advantage for other financial institutions.
Custodia is asking the court to mandate that the Fed provide access to the master account, as well as damages for lost business and opportunity costs.
Crypto Bank Custodia, which was formerly called Avanti Bank, seemed to be moving closer to acquiring the master account when it received a routing number issued by the American Bankers Association (ABA) in February – a key milestone in the process to receive a Fed account. There has been no clear progress since then, and it is not known if Custodia will succeed where others have failed. ABA did not respond to a request for comment on this story.
It is unclear what kinds of implementation issues arise when trying to open a central bank account for an entity like Custodia that doesn’t yet have regulatory approval to operate as a full-fledged bank. In December, the Office of the Comptroller of the Currency (OCC), the primary regulator of national banks in the U.S., said it would begin accepting applications for special purpose national bank charters from financial technology companies, opening up the possibility that crypto custody firms could one day get access to Federal Reserve accounts through that route.
There are a few different types of routing numbers, including ABA routing numbers and SWIFT codes. ABA routing numbers are used for checks and other transactions in the United States, while SWIFT codes are used for international wire transfers. The Federal Reserve Banks use ABA routing numbers to process Fedwire funds transfers, and the National Automated Clearing House Association (NACHA) uses them for automated clearing house (ACH) transactions.
ABA routing numbers have nine digits, and they’re divided into three groups: The first group is the check digit, which is used to verify the accuracy of the routing number; the second group identifies the Federal Reserve Bank where the bank holding the account is located, and the third group identifies the specific bank or financial institution within that Federal Reserve Bank district.