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“Republican Lawmakers File Amicus Brief in Support of Custodia Bank’s Legal Battle With the Federal Reserve”

“The Wyoming-based bank filed suit against the Federal Reserve in June, arguing that the Fed’s refusal to make a decision is unlawful and discriminatory against crypto institutions.”

What is an Amicus Curiae Brief? (

An amicus curiae (lit. ’friend of the court’; pl. amici curiae) is an individual or organization who is not a party to a legal case, but who is permitted to assist a court by offering information, expertise, or insight that has a bearing on the issues in the case. The decision on whether to consider an amicus brief lies within the discretion of the court. The phrase is legal Latin and the origin of the term has been dated back to 1605–1615. The scope of amici curiae is generally found in the cases where broad public interests are involved and concerns regarding civil rights are in question.

In American law, an amicus curiae typically refers to what in some other jurisdictions is known as an intervenor: a person or organization who requests to provide legal submissions so as to offer a relevant alternative or additional perspective regarding the matters in dispute. In the American courts, the amicus may be referred to as an amicus brief. In other jurisdictions, such as Canada, an amicus curiae is a lawyer who is asked by the court to provide legal submissions regarding issues that would otherwise not be aired properly, often because one or both of the parties is not represented by counsel.

Why Do Amicus Briefs Matter? (

The role of an amicus curiae in the court system is significant. They are considered to be the voice of prominent elements of a population, especially when the issues involved in the hearing are wide-reaching. Friends of the court can file briefs either voluntarily or on assignment, but the most common form of amicus curiae briefs is voluntary. Amicus curiae briefs are meant to express the arguments of individuals, institutions, or groups to a court that is holding a hearing on a particular issue.

In practice, the amicus curiae brief definition refers to a legal document submitted to a court that is hearing a particular topic or case. The document is written by an individual, institution, or a group of individuals or institutions who are not involved in the hearing but nonetheless have a stake in the outcome. The object of an amicus curiae brief is to influence the receiving court to make a decision that will lead to favourable outcomes for the writers.

Who is Custodia Bank?

Custodia has all the benefits of being a bank with expertise in digital assets — plus, as a depository institution, we’re eligible to connect directly with the Federal Reserve payment system*, removing middlemen and layers of fees.

Wyoming and the Digital Asset Frontier

Wyoming law provides Custodia’s customers with clear legal title to their digital assets. The state’s property rights-oriented approach to digital asset laws makes Wyoming a customer-friendly jurisdiction for digital asset market participants.

In 2019, the Wyoming Legislature enacted HB 74, which authorized the chartering of special purpose depository institutions (SPDIs). These institutions are banks that receive deposits and conduct other incidental activities, including fiduciary asset management, custody, and related activities, but cannot lend customer fiat deposits and must instead hold these customer fiat deposits 100% in reserve.

As a Wyoming SPDI, Custodia is subject to Wyoming’s customer–friendly bailment laws, which are designed to ensure that legal title to a digital asset remains with the customer and not their custodian. In other words, similar to a coat check or valet parking, customer assets belong to the customer and are legally segregated from the other assets of the institution. Moreover, in contrast to traditional custody arrangements, this legal segregation is protected by statute instead of merely by a contract that could be broken in a trust company’s bankruptcy. Bailment is designed to provide a bankruptcy-remote and off-balance-sheet status for customer digital assets.

In late 2020 both Custodia and Kraken applied for the Federal Reserve master account. To date, they have still not received a decision on whether or not they can have access to a Federal Reserve Master account.

  • Custodia filed suit against the U.S. Federal Reserve on June 7, 2022 saying the central bank was unlawfully delaying a decision on the crypto bank’s application for a master account.
  • The suit said the Fed’s own paperwork says that “a master account decision “ordinarily takes [five to seven] business days,” and that the processing delay had “clearly violated the [one]-year statutory deadline for doing so.
    • 12 U.S. Code § 4807 – Time limit on agency consideration of completed applications

      (a) In general

      Each Federal banking agency shall take final action on any application to the agency before the end of the 1-year period beginning on the date on which a completed application is received by the agency.

What is a Master account?

A Master Account is the record of financial rights and obligations of an Account Holder and the Administrative Reserve Bank (or any other Reserve Bank maintaining a Master Account identified in Operating Circular 1) with respect to each other, where opening, intraday and closing balances are determined.

  • Having an account at one of the twelve Federal Reserve Banks (a master account) is necessary for an institution to have direct access to the Federal Reserve’s payment systems and to settle transactions with other participants in central bank money.
  • Questions about who can access the Federal Reserve’s payment system and transact in central bank money are also at the heart of the debate around central bank digital currencies (CBDC), and the potential design, availability and functionality of any CBDC issued by the Federal Reserve.

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.

On August 15, 2022 the U.S. Federal Reserve published its final guidance for novel financial institutions to access its “master accounts,” something these firms need to participate in the global payment system.

What is the Process for Evaluating Requests for a master account

The Federal Reserve Banks evaluate each request on a case-by-case basis. The proposed guidelines are “centered on a foundation of risk management and mitigation” and identify the factors that the Federal Reserve Banks should consider when evaluating an institution against the type of risk targeted by each of the six principles. The evaluation is supposed to cover “risk mitigation strategies adopted by the institution (including capital, risk frameworks, compliance with regulations, and supervision) and by the Reserve Bank (including account agreement provisions, restrictions on financial services accessed, account risk controls, and denial of access requests).

Six Principles

Principle #1: Legal Eligibility

“Each institution requesting an account or services must be eligible under the Federal Reserve Act or other federal statute to maintain an account at a Reserve Bank and receive Federal Reserve services and should have a well-founded, clear, transparent, and enforceable legal basis for its operations.”

The proposed guidelines state that a Federal Reserve Bank’s assessment of an institution under this principle should also consider:

  • the consistency of the institution’s activities and services with applicable laws and regulations, such as Article 4A of the Uniform Commercial Code and the Electronic Fund Transfer Act; and
  • whether the design of the institution’s services would impede compliance by the institution’s customers with U.S. sanction programs, Bank Secrecy Act (BSA) and anti-money-laundering (AML) requirements or regulations, or consumer protection laws and regulations.

Principle #2: Safety and Soundness

“Provision of an account and services to an institution should not present or create undue credit, operational, settlement, cyber or other risks to the Reserve Bank.”

Principle #3: Risks to the Payment System

“Provision of an account and services to an institution should not present or create undue credit, liquidity, operational, settlement, cyber or other risks to the overall payment system.”

Principle #4: U.S. Financial Stability

“Provision of an account and services to an institution should not create undue risk to the stability of the U.S. financial system.”

Principle #5: Prevention of Financial Crimes

“Provision of an account and services to an institution should not create undue risk to the overall economy by facilitating activities such as money laundering, terrorism financing, fraud, cybercrimes, or other illicit activity.”

  • The institution should have an AML program consistent with the requirements in 31 CFR 1020.210(b) and comply with the Office of Foreign Assets Control (OFAC) regulations in 31 CFR Chapter V.

Principle #6: Monetary Policy

“Provision of an account and services to an institution should not adversely affect the Federal Reserve’s ability to implement monetary policy.”

  • The Federal Reserve Bank should determine, in coordination with the other Federal Reserve Banks and the Board, whether access to a master account and services by an institution itself or a group of like institutions could have an effect on the implementation of monetary policy.
  • The Federal Reserve Bank should consider, among other things, whether access to a master account by the institution could affect the level and variability of the demand for and supply of reserves, the level and volatility of key policy interest rates, the structure of key short-term funding markets, and the overall size of the consolidated balance sheet of the Federal Reserve Banks. The Reserve Bank should also consider the implications of providing an account to the institution in normal times as well as in times of stress. This consideration should occur regardless of the current monetary policy implementation framework in place.

The final guidance by the Federal Reserve will also create a multi-tiered system allowing the Fed to adapt its evaluation process for granting access depending on what kind of financial institution is applying. Each tier corresponds to a respectively more stringent review process.

  • Tier 1 would consist of eligible institutions that are federally insured. These institutions would generally be subject to a less intensive and more streamlined review.
  • Tier 2 would consist of eligible institutions that are not federally insured but (i) are subject (by statute) to prudential supervision by a federal banking agency; and (ii) any holding company of which would be subject to Federal Reserve oversight (by statute or by commitments). These institutions would generally receive an intermediate level of review.
  • Tier 3 would consist of eligible institutions that are not federally insured and not subject to prudential supervision by a federal banking agency at the institution or holding company level. These institutions would generally receive the strictest level of review.

The Fed favours its own and leaves Custodia out in the cold

BNY Mellon Launches New Digital Asset Custody Platform

NEW YORK, Oct. 11, 2022 /PRNewswire/ — BNY Mellon today announced that its Digital Asset Custody platform is live in the U.S. With select clients now able to hold and transfer bitcoin and ether, this milestone reinforces BNY Mellon’s commitment to support client demand for a trusted provider of both traditional and digital asset servicing.

As America’s oldest bank, BNY Mellon has a 238-year legacy of trust, resilience, and innovation. In this spirit, BNY Mellon formed an enterprise Digital Assets Unit in 2021 to develop solutions for digital asset technology, with plans to launch the industry’s first multi-asset platform that bridges digital and traditional asset custody.


Republican Lawmakers File Amicus Brief in Support of Custodia Bank’s Legal Battle With the Federal Reserve

US Fed Opens Pathway for Crypto Banks to Tap Central Banking System

Crypto Bank Custodia Sues Federal Reserve

Digital Asset Bank Custodia Files Lawsuit in U.S. Court Over BNY Mellon’s Crypto Approval

Davis Polk Discusses Who Can Have a Federal Reserve Master Account

BNY Mellon Launches New Digital Asset Custody Platform