A US appellate court has ruled in favor of the Federal Reserve, opposing Custodia Bank, a crypto-centric institution founded by Caitlin Long, in a lower court decision.
In a judgment delivered on Friday by the US Court of Appeals for the Tenth Circuit, three circuit judges upheld the ruling from the District of Wyoming. The appeal, initiated in April 2024 after the court denied Custodia a US Federal Reserve master account, marks another setback since the bank first submitted its application in October 2020.
“This case is framed in the context of the 21st Century: cryptocurrency, digital assets, instant wire transfers, and master accounts,” stated the judgment on Friday. “However, the issue itself is not new. Courts have examined the legality of the nation’s central bank and interpreted relevant statutes since its inception.”
Approval for a Fed master account would have given Custodia access to the payments network utilized by the US government and authorized financial institutions.
Following Custodia’s initial request through the Federal Reserve Bank of Kansas City, the Fed rejected the bank’s application in 2023, citing risks deemed “inconsistent with safe and sound banking practices” due to its emphasis on digital assets. Prior to this rejection, Custodia filed a lawsuit in 2022, claiming an “unlawful delay” by the Fed in processing its application.
Related: Custodia, Vantage Bank launch platform for tokenized deposits
What are the next steps for Custodia?
In a statement shared on X after the judgment was made public, Custodia stated it is “actively considering” a petition for a rehearing from the appellate court:
“While we were hoping for a win at the Tenth Circuit today, we received the next significant thing – a strong dissent. It raised serious Constitutional questions regarding the Federal Reserve and was penned by a judge designated to the panel of a similar case in the Ninth Circuit.”
Avanti was one of the first “blockchain banks” founded in Wyoming by Long under a supportive state regulatory framework. The company rebranded to Custodia in 2022. Cointelegraph attempted to reach Long for comments but had not received a response at the time of publishing.
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