Custodia Bank, a bank that deals with CRYPTOCURRENCIES, asked the United States Federal Reserve to reconsider its application for membership in the Federal Reserve System. However, the United States Federal Reserve rejected this request. A district court has allowed a lawsuit between Custodia Bank and the US Federal Reserve to proceed.

The Custody request “was inconsistent with the elements required by law,” according to an earlier decision made by the Federal Reserve Board, which was cited in the central bank’s Feb. 23 announcement of the denial of membership.

The Federal Reserve rejected Custodian’s membership application in January, about four years after the company first applied in 2019. Applicants have the right, under board regulations, to request that membership options be reconsidered. membership.

The reason the Fed gave for rejecting Custody’s request was that the company’s management structure was “insufficient.”

In addition to this, he referred to a joint statement that he had prepared in conjunction with the Monetary Comptroller and the Federal Deposit Insurance Corporation. In this statement, he said that cryptocurrencies were “inconsistent with safe and sound banking practices.”

Custodia has said it would like to become a member of the Federal Reserve System to be subject to the same regulations that are imposed on conventional banks. Furthermore, this would pave the way for other cryptocurrency institutions to be subject to the same strict requirements.

This week, on February 22, a Wyoming district court judge dismissed a petition by the Federal Reserve Board to dismiss a complaint filed by Custodia about a delay of more than two years in opening a master account with the Federal Reserve.

With a master account, Custodia would be able to access the Federal Reserve’s payment systems without having to use any other bank as an intermediary. Custody’s application for a master account with the Fed was rejected on January 27, more than two years after the company first filed its account application in October 2020.

After that, the Fed made a motion to dismiss the case as the rejection of the account rendered the complaint meaningless. Custody, on the other hand, filed a proposed amended complaint with the court on February 17, alleging that the Federal Reserve unfairly singled out and denied its request as part of a “focused and coordinated” effort with President Joe Biden’s administration and requesting for the court to reverse the decision.

Custodia spokeswoman Nathan Miller said in a statement released Feb. 17 that the case “focuses on the primary legal issue: whether Congress ever authorized the Fed’s jurisdiction to determine master accounts.” He also said that the Fed “pressed the hand” of the cryptocurrency bank, stating that the institution “tried every avenue to find a sensible route.”

The judge set a March 1 deadline for Custody to file its first revised complaint with the court.