The bank, which has repeatedly applied for a Federal Reserve master account, has filed a petition with the U.S. Supreme Court to determine whether regional Federal Reserve presidents have the authority to deny services to institutions, threatening the viability of innovative business models.
Key Takeaways
Custodia petitioned the Supreme Court, challenging the Fed’s unchecked power to deny vital master accounts.The Fed blocked Custodia’s master account in 2023, threatening the survival of innovative financial models.The Supreme Court will review the petition in October, potentially altering state and federal banking rules.The bank has filed a certiorari petition to the Supreme Court to ascertain the level of power that Federal Regional Bank presidents have to manage the approval of master accounts. Master accounts are essential for financial institutions, as they enable them to move funds on central bank rails, taking advantage of the Federal Reserve’s suite of services, including Fedwire, FedNow, and FedACH.
The filing argues that the Fed’s decisions might constitute an “abuse of authority,” stressing that the case “presents an exceptionally important question: whether regional Federal Reserve Bank presidents possess unbounded, unreviewable discretion to deny disfavored banks access to the Federal Reserve’s payment services.”
Custodia Bank was denied access to a master account in 2023, with the Federal Reserve Board stating that “the firm’s novel business model and proposed focus on crypto-assets presented significant safety and soundness risks.”
The Supreme Court will decide whether to consider this case in October.
