Guaranteean innovative bitcoin and cryptocurrency bank seeking to establish a charter in Wyoming, has taken a bold step by offering Pioneering lawsuit v. Federal Reserve on June 7, 2022. The legal action arose from the Fed’s inexplicable delay in approving Custodia’s application for a “principal account,” a process that normally takes 5 to 7 days but has been pending for more than two years. This extended delay, eventually turning into a Rejected on January 27, 2023, raised concerns about potential biases in favor of banks based on troublesome newcomers like Custodia. The outcome of this lawsuit could have profound implications for the future of banking regulations and reshape the entire industry.
Custodia’s disruptive approach aims to revolutionize the banking model by positioning itself as the least risky bank in the US, making it highly attractive to investors. It does this through its charter as an SPDI Bank or Special Purpose Depository Institution. These SPDI banks “are fully booked banks that receive deposits and conduct other activities incidental to banking, including custody, asset servicing, fiduciary asset management, and related activities,” according to the Official Website. In other words, their business model is to make money from banking and take much less risk than any other bank in the world. A key aspect of Custodia’s strategy involves completely eliminating the controversial practice of fractional reserve lending, a move that no other bank in the United States has made. If Americans had any idea what kind of risk they were taking by depositing money in a partial reserve bank, they would probably revolt.
SPDI banks’ commitment to eliminate partial reserve lending is likely to strike a chord with institutions seeking to mitigate risks and hedge their investments. In addition, a bank like Custodia can benefit from Wyoming’s leading regulatory framework for digital assets, providing clients with a platform that ensures safety and security without resorting to redistribution or over-leveraging. This unique offering sets banks like Custodia apart from traditional banks and positions them as a trusted partner for institutional investors.
Custodia’s lawsuit against the Federal Reserve marks a historic milestone. As the case progresses to the discovery stage, previously undisclosed internal emails and documents within the Fed are expected to surface. This transparency can reveal any potential advantages granted to existing banks and highlight the fairness of the approval process. Custodia will also likely have the opportunity to conduct sworn interviews with prominent Fed officials, including Jay Powell and Kansas City Fed Governor Esther George. Testimonials like these can reveal more insights into the approval process Moonstone Bankin which FTX/Alameda invested, raising questions about proper handling and fairness.
While the outcome of the lawsuit remains uncertain, Custodia’s positive ruling could lead to a significant influx of institutional capital into Wyoming. The country’s digital asset regulatory framework, coupled with Custodia’s disruptive business model, provides clarity and primacy for digital assets, attracting institutional investors looking for reliable and innovative banking solutions. The potential impact of Custodia’s success extends beyond the banking industry, potentially leading to significant price movements in Bitcoin and influencing future banking regulations. As the case progresses and the claim for an administrative record from the Federal Reserve is expected, the urgency and importance of this lawsuit will become more apparent within US courts.
In which March 2023 NewsletterLynn Alden bluntly says, “From a depositor’s perspective, banks are essentially highly leveraged bond funds with payment services attached, and we naively trust them with our hard-earned savings.” Where would you prefer to keep your money, in a “highly leveraged bond fund”, or with Custodia?
If the answer to this question is not clear, it’s time for a wake-up call.
The philosophy is simple: instead of the famous slogan “Don’t be evil,” the regulations of SPDI banks state that “You can’t be evil.” Unlike traditional banks, an SPDI bank like Custodia will prioritize security and the well-being of its customers.
This case may be a reckoning, and could become a watershed event that extends far beyond bitcoin, exposing the Federal Reserve’s transgression of our money and the deep injustices of our banking systems. Technological developments have brought these issues to the fore, requiring action on them.
