Overview
The cryptocurrency market is facing a major hurdle as the traditional banking sector, led by the Federal Reserve, imposes delays in granting approval for master accounts to crypto banks. A master account is a pivotal bank account, offering account holders direct access to the Fed’s payment system and associated services. The absence of a master account limits a crypto bank’s ability to provide customers with the same degree of security, efficiency, and convenience found in traditional banking institutions.

Custodia Bank’s Wait for Master Account Approval Exceeds 19 Months
Custodia Bank specialises in digital assets such as cryptocurrencies and offers both banking and custody services for its customers. Based in Wyoming, the bank takes advantage of the state’s favourable laws and regulations for the cryptocurrency market. The Wyoming-chartered special purpose depository institution is spearheaded by former Wall Street Executive and blockchain trailblazer Caitlin Long.
Custodia Bank endeavours to bridge the divide between the crypto world and traditional finance and offer digital asset custody and banking services to both institutional and retail clients. However, the bank now finds itself in a protracted wait of over 19 months for master account authorisation.
Custodia Bank has escalated the impasse by filing a lawsuit against the Federal Reserve in June 2022. It alleged a “Patently unlawful delay”, in processing its master account application. The lawsuit contends that the Federal Reserve’s actions contravene the statutorily mandated one-year review period for such applications. It also asserts discriminatory treatment, maintaining that crypto banks like Custodia Bank are subject to disparate standards and procedures compared to traditional banks.
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Caitlin Long Speaks Out
Caitlin Long has been a prominent figure in the cryptocurrency industry for quite some time now. A vocal advocate for the adoption and regulation of cryptocurrencies, she is also the founder and CEO of Avanti Bank, a Wyoming-based bank that specialises in digital assets. She has characterised the whole situation as a “Banking battle”.
According to Long, the Federal Reserve’s actions amount to an attempt to quell innovation and competition within the crypto industry by withholding or delaying access to its services. She has also highlighted the conduct of the Fed, which diverges from its publicly stated objectives of fostering financial inclusion, operational efficiency, and stability.
In a recent CNBC interview, Long weighed in on the implications of Ripple’s partial victory in its legal battle with the SEC. She suggested that Ripple’s triumph can potentially serve as a precedent for other crypto projects grappling with analogous regulatory scrutiny. This could be the first move to clarify the legal standing of cryptocurrencies in the United States.
Related: Bybit CEO: “Crypto Regulation in Asia — An Opportunity, Not a Crisis”

Other Examples of Crypto Banks That Have Been Waiting for Master Account Approval
Custodia Bank is not alone when it comes to waiting for master account authorisation from the Federal Reserve. Over the years, there have been many instances of banks waiting for the authorisation, which adds weight to Long’s opinions.
Kraken Bank
Kraken Bank is a crypto bank established by Kraken, which is one of the oldest cryptocurrency exchanges in the world. The bank received its charter as a special purpose depository institution from Wyoming in September 2020. However, it has been unable to obtain its master account from the Fed.
Avanti Bank
Avanti Bank was also founded by Caitlin Long and received its charter as an SPDI from Wyoming in October 2020. However, it too has not received master account authorisation from the Fed to date.
Protego Bank
Protego Bank is a cryptocurrency bank that was chartered by Washington State in January 2021. The bank, which specialises in providing fiduciary and custody services for digital assets, is also seeking a master account from the Fed, which has not been approved yet.
The Federal Reserve’s FedNow Service
In the same interview, Long adopted a balanced perspective when it came to addressing the Federal Reserve’s forthcoming launch of its instant payment service, FedNow. She acknowledged the potential benefits of FedNow, particularly in terms of heightening demand for expeditious and cost-effective payment solutions.
However, she also cautioned that FedNow’s introduction could encroach upon the privacy and autonomy of individuals. On the other hand, it would strengthen the Fed’s ability to monitor and exert control over its financial transactions.
In her concluding remarks, Long conveyed her optimism concerning the future of crypto banking, notwithstanding the challenges and barriers presented by regulatory entities like the Federal Reserve. She articulated her belief that crypto banking will eventually rise, providing the many advantages and prospects that it extends to both customers and enterprises.
Also Read: Indonesia’s New Exchange to List Binance’s Tokocrypto
Conclusion
The crypto industry’s ongoing battle with the Fed poses a major challenge to the expansion of crypto banking services in the United States. Personalities such as Long remain optimistic about a future where traditional banks and crypto banks will be able to function side by side to deliver their services to users the world over.
Frequently Asked Questions
When Was Custodia Bank Founded?
Custodia Bank was founded in 2020 by Caitlin Long, Bryan Bishop, Britney Reddy, Chuck Thompson, and Zev Shimko. It is based in Wyoming, which has favourable laws and regulations for the crypto industry.
When Did Custodia Bank First Apply for Master Account Authorisation?
Custodia Bank first applied for a master account with the Federal Reserve in October 2020. However, it hasn’t received it yet and has filed a lawsuit against the Fed for the delay in response.
What Role Does the Federal Reserve Play in the Cryptocurrency Market?
The Federal Reserve, which is the central bank of the United States, is tasked with regulating the monetary and banking systems of the country. While it does not play any direct role in regulating crypto, it is responsible for monitoring cryptocurrencies held by banks. It also assesses the launch of central bank digital currencies.
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