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Custodia Bank Challenges Federal Reserve in Appeals Court

Custodia Bank has taken its legal battle to the 10th Circuit Court of Appeals, aiming to overturn a Wyoming court ruling that empowered the Federal Reserve to deny it a master account. This move marks a significant escalation in the ongoing dispute between Custodia Bank and federal banking authorities.

Custodia Bank Fights Back

In its opening brief, Custodia Bank challenges the Wyoming district court’s ruling, claiming that the Federal Reserve’s power to deny master accounts to state-chartered banks undermines the dual banking system. This system offers banks the choice between state or federal charters, promoting flexibility and competition in banking.

Violation of the Dual Banking System

Custodia Bank’s legal team, gave a valid reference to the case Cantero v. Bank of America to highlight the importance of maintaining parallel federal and state banking systems. 

According to their brief, “The United States maintains a dual system of banking, made up of parallel federal and state banking systems,” highlighting the regulatory autonomy states traditionally enjoy in banking matters.

Caitlin Long Took a Jab on Fed

Caitlin Long, CEO of Custodian Bank, and Appeals Attorney Michelle Kallen discussed the Custodia Bank lawsuit against the Federal Reserve Board, claiming the Fed and OCC have unjustified their actions for a master account. Long argues that the Fed hasn’t followed the law and denied the request earlier. She also criticizes Senator Elizabeth Warren for continuing to debank crypto, citing Operation Choke Point 2.0.

Monetary Control Act and Fair Access

Plus, Custodia Bank also objects that the Federal Reserve’s actions may violate the Monetary Control Act (MCA). This federal law mandates equal access to Federal Reserve services for all state-chartered banks. However, the bank’s attorneys point to specific language in the MCA, which states that “all Federal Reserve bank services…shall be available to non-member depository institutions.” 

By denying Custodia Bank a master account, they argue, the Federal Reserve could be breaking this law.

Crypto Impact 

If Custodia Bank gets a master account, it will be a positive move for crypto and for other groups that want to get similar accounts. Custodia Bank’s CEO has also predicted a strong bull market for Bitcoin before the U.S. election, despite a recent price dip. 

Historically, Bitcoin tends to drop after halvings due to miner sell-offs, but Long expects a big price rally in October. Bitcoin currently trades at $61,472, up 1%, with institutional buyers stepping in after a dip and a spot ETF seeing $31 million in new investments.

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