A US appellate court has ruled against Custodia Bank, the crypto-friendly institution founded by Caitlin Long, siding with the Federal Reserve in a lower court decision.
In a Friday judgment in the US Court of Appeals for the Tenth Circuit, three circuit judges affirmed a lower court ruling in the District of Wyoming. The appeal, filed in April 2024 after the court ruled against granting Custodia a US Federal Reserve master account, was the latest setback since the crypto-friendly bank first submitted its application in October 2020.
“This case comes clothed in 21st Century terms: cryptocurrency, digital assets, instant wire transfers, and master accounts,” said the Friday judgment. “But there is nothing new about this issue. Courts have probed the legality of our nation’s central bank and interpreted the relevant statutes since the founding.”
Being approved for a Fed master account would have granted Custodia access to the payments network used by the US government and authorized financial institutions.
After Custodia initially requested access through the Federal Reserve Bank of Kansas City, the Fed rejected the bank’s application in 2023 for risks that were likely to be “inconsistent with safe and sound banking practices” due to its focus on digital assets. Custodia filed a lawsuit in 2022 before the rejection, alleging an “unlawful delay” by the Fed in processing its application.
What are the next steps for Custodia?
In a statement posted to X after the judgment was posted to the public docket, Custodia said it was “actively considering” petitioning the appellate court for a rehearing:
“While we were hoping for a win at the Tenth Circuit today, we received the next big thing – a strong dissent. It raised serious Constitutional questions about the Federal Reserve and was written by a judge sitting by designation on the panel of a similar case in the Ninth Circuit.”
Avanti was one of the first “blockchain banks” established in Wyoming by Long under a friendly state-level regulatory environment. The company rebranded to Custodia in 2022. Cointelegraph reached out to Long for comment but had not received a response at the time of publication.