Seven U.S. Republican lawmakers have thrown their weight behind Custodia Bank in its ongoing legal battle to get a master account at the Federal Reserve.
Three members of the Senate Banking Committee – Sens. Cynthia Lummis (R-Wyo.), Steve Daines (R-Montana) and Kevin Cramer (R-N.D.) – and four members of the House Financial Services Committee – Reps. Warren Davidson (R-Ohio), Ted Budd (R-N.C.), Trey Hollingsworth (R-Indiana) and William Timmons (R-S.C.) – submitted an friend of the court (amicus) brief on Thursday, urging a Wyoming court to dismiss the Federal Reserve’s motion to dismiss a suit filed by Custodia.
A similar brief has also been filed by the state of Wyoming.
Custodia (formerly known as Avanti Bank) filed suit against the Fed in June, alleging that the U.S. central bank was unlawfully delaying its decision on whether or not to grant the crypto bank’s application for a master account, and calling for an immediate approval. At the time of the suit, Custodia had already waited 19 months to hear back about its application – seven months longer than the allotted one-year statutory deadline for such a decision.
In Custodia’s complaint, lawyers for the Wyoming-based bank argued that a master account was “vital to Custodia’s ability to operate effectively and efficiently,” and that the Fed’s continued waffling on the decision was detrimental to Custodia’s customers – and, furthermore, indicated a “black box bureaucratic process with no clear rules” that allowed it to “act in complete secrecy, whenever and however they choose.”
Sen. Lummis and her fellow lawmakers have echoed Custodia’s concerns in their brief, arguing that the Fed’s indecision is unlawful under the Monetary Control Act of 1980, which requires the Fed to issue a master account to every qualifying depository institution in the U.S. “without exception.” Failure to do so, they argue, is discriminatory.
“The Board [of Governors] and the Reserve Bank are not empowered to determine what is – and what is not – a ‘depository institution’ under the existing statutory scheme,” they write. “It is not conceivable that the Board or the Reserve Bank should have the authority to essentially determine what depository institutions are ‘real depository institutions’ and which are not.”
The lawmakers also back up Custodia’s claims that the Fed’s failure to issue them a master account has negatively affected their business, writing:
“A depository institution that does not have a master account ‘can’t really function as a financial institution’ and if the Federal Reserve has the ability to determine which depository institutions can and cannot receive a master account, the Fed would essentially be the ultimate decision-maker for what is and is not a bank in this country.”
The Federal Reserve, for its part, has argued that it needs more time to consider the broader ramifications and logistics of offering crypto-based institutions access to its payment systems.
A hearing on the motion to dismiss is currently scheduled for Oct. 13.