Without a master account, Custodia Bank contended, it is a “second-class citizen” at the whim of an intermediary bank.

The US district court denied Custodia Bank’s request for a declaratory judgment and decided against awarding the digital asset bank a Federal Reserve master account. Custodia asserts that it is investigating every option and is not giving up.

“We are analyzing the Court’s ruling and all of our alternatives, including an appeal,” a Custodia Bank representative stated to Cointelegraph.

Judge Scott Skavdahl rejected Custodia’s attempt to obtain a Federal Reserve master account in a filing filed on March 29 to the United States District Court of Wyoming. The account, which is frequently called “a bank account for banks,” makes it easier for financial organizations to use the payment systems operated by the Federal Reserve.

Custodia argued that the bank would be at a disadvantage if it couldn’t provide the same custodial services for crypto-assets as other financial institutions since it couldn’t do so without a master account.

It contended that Custodia is reduced to a second-class citizen, dependent on and loyal to an intermediary bank if it can function without a master account.

Moreover, Custodia has no right to have the Federal Reserve Bank of Kansas City ruling reversed, according to Skavdahl:

“FRBKC must be granted summary judgment on Claim II, and Custodia is not entitled to its requested writ of mandamus compelling FRBKC to issue its master account.”

In October 2020, Custodia applied for a master account with the Federal Reserve. If approved, the application would give the bank access to the Fedwire network, which handled more than 193 million transactions the previous year.

The Fed denied Custodia’s membership application in January 2023, stating that its activities in the cryptocurrency field were “inconsistent with the required factors under the law.”

Known as “blockchain banks,” Custodia was among Wyoming’s first SPDIs (Special Purpose Depository Institutions). SPDIs were established to assist companies whose cryptocurrency transactions prevented them from obtaining banking services from the Federal Deposit Insurance Corporation.