Custodia seeks a judge to overturn the Federal Reserve's decision to deny its master account application

ChainCatcher news, according to Fox Business reporter Eleanor Terrett sharing information on X, the digital asset bank Custodia Bank has submitted a brief to the U.S. Court of Appeals for the Tenth Circuit, challenging a Wyoming judge's decision granting the Federal Reserve unrestricted power to deny its master account.

Custodia is asking the appellate court to instruct the Wyoming district court to reverse its decision to deny Custodia's application for a master account and to grant it a master account.

Custodia CEO Caitlin Long has hired two senior Supreme Court attorneys to defend her company. Here are some key points they argue:

1. Custodia's lawyers claim that the Federal Reserve's power to refuse to open a master account for state-chartered banks undermines the dual banking system, which allows banks to freely choose whether to operate under state or federal charters;
2. They also argue that the Federal Reserve discriminates against state-chartered banks seeking to obtain master accounts, which may violate the Monetary Control Act, a law that allows state-chartered banks seeking Federal Reserve services to gain fair access;
3. They emphasize the use of the word "shall" in the Monetary Control Act by Congress, stating that "all services of Federal Reserve Banks… shall be open to non-member deposit institutions," to illustrate Congress's intent to allow all eligible banks equal access to Federal Reserve services.

Previously, Custodia hoped to operate as an uninsured bank, issuing a stablecoin backed by cash and other assets. However, the Federal Reserve determined that the bank was not entitled to a master account in the Federal Reserve System and denied its application to join the Federal Reserve System, indicating that the Federal Reserve aims to isolate payment rails from crypto assets. It is reported that a Federal Reserve account allows holders to transfer reserves directly to another financial institution without another intermediary.