Digital banks continue to face many painful regulatory actions and hurdles in applying for work permits; however, in this case, Bitcoin Bank Custodia decided to resolve this issue … in court.
On May 7, Bitcoin Bank Custodia Caitlin Long filed a lawsuit against the Federal Reserve Board and the Federal Reserve Bank of Kansas City, accusing them of unlawfully delaying an application for a master account that would allow the bank to operate legally in the country. Caitlin Long is also the founder of Avanti Financial Group, the second crypto bank legally operating in the US after Kraken.
According to lawsuitCustodia argues that the Fed is acting contrary to its own legal provisions because, in their own words, issuing a document requested by a bank “usually takes [five to seven] working days.” However, they managed to find ways to delay his issuance.
Application process is more than 19 months behind schedule
The lawsuit focuses on the 19-month delay that Custodia had to face in applying for a document that any other bank could have received in less than a week.
That’s why the bank says the Fed has “clearly violated [one]the statutory period for doing so.” They even indicated that they received a routing number issued by the American Bankers Association (ABA), which is only given to financial institutions authorized to open a master account.
On top of that, Custodia alleges that the Fed is delaying its filings on behalf of legacy financial institutions “whose interests are represented on the Board of Directors of the Kansas City Fed.”
This master account is vital to the bank as it will provide direct access to the Fed without having to go through intermediary banks, allowing it to streamline its operations by providing a secure bridge between digital assets and the US dollar payment system.
Custodia has been compliant with US law for many years
According to the court document, the Federal Reserve Bank of Kansas City knew about Custodia’s business plan many months before it was filed and never mentioned any flaws until 2021. This situation completely changed when the Board took control of the decision-making processes, violating the legal time limit of 1 year for application approval.
In addition, Custodia pointed out that under federal law they are expressly entitled to access to the FED, and the same law prohibits the Board from discriminating against these types of institutions.
This lawsuit purportedly exposes not only the unacceptable delay that the Fed Board allowed for Custodia, “but also the fact that the defendants have an unregulated process for deciding who can compete in the financial services marketplace.”
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Credit : cryptopotato.com