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The Custodia Bank sued the Central Bank in 2022 over the regulator’s delayed decision on a master account approval. On Friday, a judge ruled that the Federal Reserve does not have to provide the bank with access to its master account.&nbsp; Permission to master account was denied to Custodia 
As Judge Scott Skavdahl said in hisjudgment in the US District Court in the District of Wyoming, Federal Reserve Banks can grant master accounts. In 2022, Custodia Bank sued the Federal Reserve Board of Governors and the Federal Reserve Bank of Kansas City for delaying a decision on its central bank master account application.&nbsp; 
It gives institutions direct access to the Fed’s payment systems and gives them the most direct access to the US’s money supply. Many people without master accounts have to rely on partner banks with master accounts.&nbsp;
“If Custodia’s position was correct, it would effectively mean that every depository institution chartered under the laws of a state, regardless of how soundly crafted, is entitled to a master account allowing it direct access to the federal financial system,” the judge said.&nbsp;
The court document says Custodia claims the <a href="https://news.todayq.com/who-will-blink-first-fed-or-crypto-market/" target="_blank" rel="noopener noreferrer nofollow">Fed </a>violated the Administrative Procedures Act and its actions were “arbitrary, capricious, an abuse of discretion, or otherwise not by the law.” Custodia wants the judge to compel the board to issue a master account. Regulations are developed and issued by federal agencies under the APA.&nbsp;
Because the board didn’t take final action, the court threw out the APA claim. The judge said Custodia is not statutorily entitled to a master account.
“The real dispute at the heart of this case is whether FRBKC must grant a master account to Custodia because it was legally eligible or whether FRBKC possessed the discretion to deny Custodia’s master account application despite its eligibility,” the judge said.&nbsp; It was filed initially in 2020 
In 2020, Custodia filed its application with the Kansas City Fed. The Federal Reserve Board of Governors intervened in the spring of 2021, attempting to take control of the decision-making process.&nbsp;
Custodia’s master account request was denied in January 2023. Custodia did not immediately respond to a request for comment.&nbsp;
As a special purpose depository institution, Custodia is governed by Wyoming law. These are banks that receive deposits and can custody, among other activities. According to Custodia’s website, they can’t lend “customer fiat deposits” and have to hold them 100 percent in reserve.

Crypto bank loses bid for Federal Reserve master account

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