Digital asset bank Custodia is suing the Federal Reserve over an application delay

Digital asset bank Custodia, previously known as Avanti, is suing the Federal Reserve Board of Governors and the Federal Reserve Bank of Kansas City for delaying a decision on its application for a central bank master account.

A Federal Reserve master account allows institutions direct access to the Fed's payment systems. It enables the most direct access to the US's money supply available to financial institutions. Those without master accounts are often forced to rely on partner banks with master accounts to provide services.

The Wyoming-chartered crypto bank Custodia wants an account to "sharply reduce its costs" and "bring new products and options to users of financial services," according to the complaint. The bank says direct access is "vital" to its ability to operate effectively. Forbes first reported the news Tuesday.

But its application has been stuck in limbo before for more than a year and a half, according to its complaint.

Custodia filed its application with the Kansas City Fed in 2020. The Kansas City Fed confirmed Custodia's application was complete and contained "no showstoppers," according to the complaint. In the spring of 2021, the Fed board of governors stepped in and sought control of the decision-making process, starting the delay.

Between then and now, Custodia contends that it has exhausted all informal means of obtaining a decision on its application. 

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The firm argues the delay violates the one-year statutory deadline and breaches the schedule on the filings, which says a master account decision usually takes five to seven days. 

The delay has also forced the bank to put off offering its se