Various parties have submitted amicus briefs to the appellate court, advocating for Custodia Bank to receive approval for a master account from the Federal Reserve. The US Custodia Bank first applied for this account in October 2020 and subsequently filed a lawsuit against the central bank in June 2022, alleging “unlawful delay” in processing its application. The Federal Reserve rejected Custodia’s application in 2023, citing the bank’s connections to the crypto space as a primary reason. In March 2024, a judge supported the Fed’s decision, denying Custodia the chance to have its application reviewed.
Legal Support for the US Custodia Bank
Donald Verrilli, the U.S. solicitor general from 2011 to 2016, filed an amicus brief with the U.S. Tenth Circuit Court of Appeals on July 3. Verrilli, representing the Blockchain Association, claimed that federal regulators were engaging in “aggressive, coordinated efforts to ‘debank’ the digital asset industry.” He stated, “Unfortunately for Custodia, its application was caught in the current of federal regulators’ aggressive, coordinated efforts to ‘debank’ the digital asset industry.” According to the crypto update, the brief supported Custodia Bank’s appeal following a March decision by the U.S. District Court for the District of Wyoming that denied the bank access to a master account.
Federal Reserve’s Position
In January 2023, the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency issued statements asserting that crypto was “highly likely to be inconsistent with safe and sound banking practices.” Following this coordinated statement, the Federal Reserve rejected Custodia Bank’s application for a master account. Verrilli further added, “Through no fault of its own, Custodia became the focus of federal banking regulators’ campaign to isolate the digital asset industry from the greater national economy.”
Support from Other Entities
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Custodia Bank’s appeal has garnered support from several quarters. Former U.S. Senator Pat Toomey, Wyoming Secretary of State Chuck Gray, U.S. Senate Banking Committee members, and the U.S. House Financial Services Committee have all filed amicus briefs. News sources have reported that Paul Clement, another former U.S. Solicitor General, also filed a brief for the Digital Chamber and Global Blockchain Business Council, claiming that Custodia had fallen into “disfavor with federal regulators.”
Potential Impact of Supreme Court Decision on US Custodia Bank Case
The timing of the appellate court’s decision on Custodia Bank’s request remains uncertain. However, the judges will likely consider a June 28 Supreme Court opinion that overturned the Chevron doctrine, which required courts to defer to federal agencies’ interpretation of the law. This ruling could influence the Federal Reserve’s decision regarding Custodia Bank’s application for a master account.
On July 10, the U.S. House of Representatives is set to reconsider a resolution to overturn a Securities and Exchange Commission accounting rule that has prevented banks from handling crypto. Although this legislation was initially passed in both the House and Senate, President Joe Biden vetoed it in May. The House can override the veto with a two-thirds majority vote. News sources deem this legislative move crucial for the US Custodia Bank, as the case represents a pivotal moment for the future of crypto banking, impacting BTC, ETH, and the broader market.
Conclusion
The case of Custodia Bank highlights the ongoing tension between innovative financial institutions and federal regulators. With significant legal and legislative battles ahead, the outcome of Custodia’s appeal could have far-reaching implications for the crypto industry and its integration into the traditional banking system. The BIT Journal concludes that the continued advocacy by influential figures and organizations underscores the critical nature of this issue within the evolving landscape of digital assets and banking.
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