Custodia Bank Files Disputing Fed’s Violation of Laws and Dual Banking System
Custodia Bank filed an opening brief in the 10th Circuit Court of Appeals. They are appealing a decision by a judge in Wyoming that gave the Federal Reserve the authority to open master accounts. Additionally, the brief urges the appellate court to order the Wyoming district court to vacate the denial and order a principal to account for custody.
Custodia Bank Filed the 10th Circuit Opening Summary
Custodia Bank CEO Caitlin Long has hired two veteran Supreme Court lawyers for her case against the Fed. Their allegations focus on several key points, including the breach of the dual banking system. Lawyers for Custodia Bank argue that the Fed’s authority to deny primary accounts to state-chartered banks undermines the dual banking system.
This system allows banks to choose between a state charter or a federal charter. Therefore, Cantero v. Bank of America. “The United States maintains a dual banking system consisting of parallel federal and state banking systems,” the 10th circuit briefing said.
Custodia’s lawyers also argue that the Fed’s authority to discriminate against government-chartered banks could violate the Currency Control Act (MCA). The MCA ensures that government-chartered banks have fair access to Fed services. In addition, they noted that Congress used the word “shall” in the MCA to indicate that “all Federal Reserve banking services…shall be available to nonmember depository institutions.”
Additionally, Custodia’s brief argues that there is no basis for the Fed’s actions to be immune from judicial review. They claim that mandamus relief is available against the Federal Reserve Bank of Kansas City (FRBKC). They also note that the Administrative Procedure Act provides a remedy against the Board if it disobeys an order of the board.
The summary also explains the historical significance of the dual banking system, emphasizing that it has survived for over 150 years and remains resilient and economically responsive. Therefore, the dual banking system respects distinct and equal state and federal roles.
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Other Arguments Against the Fed
Wyoming enacted a law in 2019 that allows qualified applicants to obtain Special Purpose Depository Institution (SPDI) certification, which is the brief summary of Custodia. SPDIs take deposits, facilitate US dollar payments, and provide digital asset custody services.
They also do not lend money and must comply with all applicable federal laws. This is at the heart of the Custodia Bank case because the Fed’s refusal to grant a primary account to a qualified SPDI like Custodia is discriminatory.
Additionally, the brief explains that the MCA was enacted to address payment access and unequal treatment of member and non-member banks. The MCA required the Fed to provide all depository institutions with direct access to payment system services on the same terms as member banks.
In addition, Custodia’s attorneys argue that Section 248a(c)(2) of the MCA establishes a fee schedule for Fed services and requires those services to be made available to nonmember depository institutions. “All Federal Reserve bank services under the fee plan will be available to nonmember depository institutions,” the summary states.
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