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The Fed’s 19-month delay in approving its Master account application, according to Custodia, violates federal law.

When it comes to obtaining operational licenses, digital banks face a slew of demanding regulatory procedures and roadblocks, but, in this case, the Bitcoin Bank Custodia chose to address the matter in a court of law.

Caitlin Long’s Bitcoin Bank Custodia filed a complaint against the Federal Reserve Board of Governors and the Federal Reserve Bank of Kansas City on May 7, accusing them of illegally delaying the bank’s application for a master account would allow it to function legally in the nation.

Custodia alleges that the FED is violating its legal stipulations because the release of the paperwork requested by the bank normally takes [five to seven] business days, according to their statements. They have, however, found means to postpone its release.

Over a year and a half behind schedule

Custodia was forced to wait 19 months for a document that any other bank could have received in less than a week, according to the lawsuit.

That’s why the bank claims the Fed did so in blatant violation of the [one]-year statutory timeframe. They even said that they had acquired the American Bankers Association’s (ABA) routing number, which is only granted to financial institutions that are allowed to create a master account.

Furthermore, Custodia contends that the Fed is delaying its applications to protect legacy banking firms whose interests are represented on the Kansas City Fed’s Board of Directors.

This master account is critical to the bank because it would provide direct access to the Fed without the need for intermediate institutions, allowing the bank to expedite its operations by providing a safe bridge between digital assets and the US dollar payment system.

Custodia has followed all US rules

According to the complaint document, the Kansas City Fed knew of Custodia’s business plan months before it was submitted, and they never addressed any flaws until 2021. When the Board took authority over the decision-making procedures, it violated the one-year legal deadline for approval of the application.

Furthermore, Custodia stated that they are authorized to access the FED under federal law and that the same legislation precludes the Board from discriminating against these organizations.

This lawsuit purports to expose not just the FED Board’s illegal postponement of Custodia but also the defendants’ uncontrolled procedure for determining who can participate in the financial services market.

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