Custodia Bank vs. Fed: Paul Clement Files Amicus Brief for Crypto Industry

1 week ago 1208581

published: July 4, 2024 at 01:09 PM GST

July 4, 2024 at 01:09 PM GST 3 mins read News

  • Paul Clement’s amicus brief bolsters Custodia Bank’s case against the Fed, emphasizing constitutional concerns and blockchain industry growth.
  • TDC and GBBC-USA argue denying banks access to digital assets could stifle blockchain innovation and growth.
  • The court’s decision grants excessive power to Fed officials, posing risks to the blockchain industry and state-chartered banks.

In the ongoing Custodia Bank v. Fed case, former Solicitor General Paul Clement has filed a Friend of the Court brief in defense of the cryptocurrency business. This occurred one week after Custodia Bank contested the Federal Reserve’s authority to refuse it a master account in an appeal to the 10th Circuit Court. Given his victory in defeating the Chevron Defense in the Supreme Court case concerning Loper Bright fisherman, Clement’s intervention gives the case a lot more weight.

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The Digital Chamber (TDC) and the Global Business Blockchain Council-USA (GBBC-USA) have also expressed their support. Both organizations have extensive experience in the digital assets industry. They argue that if state-chartered banks can’t join the national banking system just because they deal with digital assets, it could hurt the blockchain industry’s growth. This industry, worth trillions of dollars, depends a lot on having access to the global financial system.

Constitutional Questions Raised

Clement’s brief raises constitutional questions regarding the Fed’s structure. He argues that the district court’s decision grants Federal Reserve Bank presidents significant and largely unconstrained discretionary power. Consequently, this raises serious constitutional issues under Article II. Clement states, “The district court’s decision threatens the dual banking system by granting Federal Reserve Bank officials unreviewable discretion to cripple state-chartered banks operating legally.”

Moreover, TDC and GBBC-USA highlight that the court’s decision sets a dangerous precedent. They argue that it gives politically unaccountable federal officials unchecked power to Silence innovation. Hence, legitimate businesses could be cut off from crucial access to the global financial system. This could hinder the development and success of the digital assets industry.

Impact on State-Chartered Banks

Furthermore, state-chartered banks will be impacted by the lower court’s ruling. The Federal Reserve Bank of Kansas City (FRBKC) has been given unreviewable discretion to refuse master account requests from nonmember depository institutions. According to TDC and GBBC-USA, this decision is problematic. Despite following legal boundaries, these institutions could be unfairly denied essential banking services.

Furthermore, the organizations argue that this decision undermines the principles of a dual banking system. It gives federal officials excessive power, potentially impacting any industry that might fall out of favor with them. Therefore, the appellate court must reconsider this decision to ensure a balanced and fair regulatory environment.

Custodia Bank v. Fed’s decision may have an impact on state-chartered banks as well as the digital assets sector. Paul Clement’s involvement and the support from TDC and GBBC-USA underscore the importance of this case. It highlights the need for a fair and transparent regulatory framework for all financial institutions.

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