Digital asset bank Custodia Bank has filed a lawsuit in a US court in Wyoming over what it calls “favoritism” and a “lack of respect” by the board of the Kansas City Fed in allowing BNY Mellon ( BK ) to getting involved in crypto. custody but does not give Custodia approval for a Fed master account.
Custodia, which was formerly known as Avanti Bank, said it has been waiting 19 months to hear back from the Fed about its approval for a main account. Master accounts will allow Custodia to deposit funds with the Fed and be linked directly to the global financial system.
Being a well-established bank, BNY would have a master account with the Fed. Without a master account, institutions like Custodia will have to use an intermediary bank and be subject to that bank’s rules, regulations and fee structure. In June, Custodia filed suit against the Fed, alleging that the U.S. central bank is unlawfully delaying its application and has the support of a number of Republican lawmakers.
“Last week, the Federal Reserve told a federal judge that the custody of digital assets, such as Bitcoin, poses a ‘new, precedent-setting risk.’ This week, the Fed allowed BNY Mellon to do the exact same thing. So it has one rule for innovators like Custodia Bank, and another for the nation’s oldest bank,” Nathan Miller, a spokesman for Custodia Bank, told CoinDesk in an email. “After waiting more than 24 months, we seek nothing more than fair and equal treatment.”
The Fed, for its part, argued that granting master accounts to banks that provide safekeeping services for digital assets poses risks to the global financial system and therefore needs additional time to fully evaluate their applications. In August, the Fed published its final guidelines for access to main accounts that involve various levels of access.
In his suit, Custodia said that BNY’s approval “is the central argument advanced by [the Fed].”
“If custody of digital assets poses a ‘new, precedent-setting risk’ to the U.S. financial system, as defendants suggest in their motions, the board could have—indeed, should have—prevented BNY from engaging in such activities, especially since BNY is a globally systemically important bank,” Custodia argued.
Custodia is not seeking any kind of relief from the Court, only to examine a press release from BNY Mellon announcing its digital asset custody platform.