When applying for operating permits, digital banks have to contend with many regulatory hurdles and painful procedures. However, the Bitcoin Bank Custodia decided that they would deal with this issue in court.
Caitlin LONG’s Bitcoin Bank Custodia filed suit against the Federal Reserve Board of Governors, and the Federal Reserve Bank of Kansas City on May 7. They were accused of delaying the application for a master account to allow the bank to legally operate in the country. Avanti Financial Group was also founded by Caitlin Lang, which is the second legal crypto bank in the United States after Kraken.
Custodia claims the FED is violating its legal stipulations. According to Custodia, the FED “ordinarily takes [five- to seven] business day[s] to issue the document requested by bank.” However, they have found ways to delay it.
The application process is more than 19 months behind schedule
Custodia was sued for the 19-month delay in applying for documents that could have been obtained by any other bank in less than one week.
This is why the Fed was “clearly violating the [one-year] statutory deadline for doing it.” They also indicated that they had received the routing numbers issued by the American Bankers Association (ABA). These numbers are only available to financial institutions who are eligible to open a master bank account.
Custodia also claims that the Fed delays its applications in the interests of legacy financial institutions, “whose interests are represented by the Kansas City Fed Board of Directors.”
The bank regards this master account as vital because it will allow direct access to the Fed, without having to go through intermediary banking. It will also be able to streamline its operations, providing a secure bridge between digital assets, and the U.S. Dollar payment system.
Custodia has been compliant with US regulations for years
According to the lawsuit, the Kansas City Fed knew Custodia’s business plans for months prior to its application. They also never mentioned any drawbacks until 2021. The Board took control of the decision-making process, violating the legal deadline of 1 year to approve the application.
Custodia also indicated that they are eligible for the FED according to federal law. The same law also prohibits discrimination against these types institutions.
This lawsuit aims to expose not only the illegal delay that Custodia was subject to by the FED Board, but also the fact the defendants have an unregulated process of deciding who can enter the financial services market.
Marla Brooks – Financial Analysis
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