Custodia says that the Kansas City Federal Reserve Board of Governors was unfair about approval delays while giving BNY Mellon the go-ahead to do cryptocurrency custody.
Custodia Bank has filed a petition in a U.S. court in Wyoming over what it calls “favoritism” and “lack of respect” by the Board of Directors of the Kansas City Fed in letting BNY Mellon (BK) do crypto custody but not giving Custodia approval for a Fed master account.
Custodia, which used to be called Avanti Bank, said it has been waiting for 19 months to hear from the Fed about whether or not it can get a master account. Master accounts would let Custodia put money in the Fed and directly connect to the world’s financial system.
BNY would have a master account with the Fed because it is a well-known bank. Without a master account, organizations like Custodia would have to use an intermediary bank and follow its rules, regulations, and fee structure.
In June, Custodia sued the Fed, saying that the U.S. central bank was illegally delaying its application. A number of Republican lawmakers back Custodia’s case.
“Last week, the Federal Reserve told a federal judge that keeping custody of digital assets like bitcoin posed a “new, precedent-setting risk.” The Fed let BNY Mellon do the exact same thing this week.
So it has one rule for innovative banks like Custodia Bank and another rule for the oldest bank in the country,” Nathan Miller, a spokesman for Custodia Bank, told CoinDesk in an email. “We have been waiting for more than 24 months, and all we want is fair and equal treatment.”
The Fed, for its part, has said that giving master accounts to banks that store digital assets pose risks to the global financial system and that it needs more time to fully evaluate their applications. In August, the Fed put out its final rules for access to master accounts, which have more than one level of access.
The Bank said that BNY’s approval directly shot down the Fed’s main argument in its lawsuit.
“If holding custody of digital assets poses a “novel, precedent-setting risk” to the U.S. financial system, as the defendants say in their motions, then the board could have and should have stopped BNY from doing these things, especially since BNY is a global systematically important bank,” Custodia argued.
The only thing Custodia wants the Court to do is looking at a press release from BNY Mellon about its digital asset custody platform.
