Rule Of Law On Trial: Ripple Vs. Custodia In The Fed Master Account Showdown

• Ripple recently announced its application for a Federal Reserve Master Account, an account that allows access to the Central Bank’s payment systems.
• Custodia Bank’s application for the same account was denied in 2023.
• Many consider a potential approval of Ripple’s application before Custodia Bank’s could be regarded as a breach of the rule of law.

Ripple has applied for a Federal Reserve Master Account and national bank charter from the Office of the Comptroller of the Currency. Meanwhile, the Fed’s denial of Custodia, a digital asset bank’s application for a Master Account, makes it highly unlikely for a Ripple approval without breaching the rule of law.

Ripple Shoots for Fed Master Account

Ripple CEO Brad Garlinghouse, via a post on X, confirmed the firm’s application for a Fed Master Account through its subsidiary called Standard Custody. As the Ripple top man noted, access to the account will enable the company to hold its stablecoin (RLUSD) reserves “directly with the Fed and provide an additional layer of security to future proof trust in RLUSD.”

The crypto firm’s bid for a Master Account fits strategically in a period when lawmakers are pushing clear and transparent rules for the crypto industry. This policy shift is also bridging the gap between traditional banking and crypto, gradually blotting out years of Operation Choke Point, a coordinated offensive against crypto integration with banks and other select sectors.

ADVERTISEMENTRipple has also applied for a national banking charter with the Office of the Comptroller of the Currency (OCC). “If approved, ” said Garlinghouse, “we would have both state (via NYDFS) and federal oversight, a new (and unique!) benchmark for trust in the stablecoin market.”

Securing a national bank charter would streamline Ripple’s connection with Federal Reserve payment systems, removing the need for traditional intermediaries. The absence of middlemen further translates to faster and cheaper transactions, which are at the core of Ripple’s value proposition and competitive edge as a cross-border payments powerhouse.

Ripple Master Account Unlikely, Following Custodia Bank’s Master Account

In 2020, Custodia Bank, a digital asset payment and custody firm, led the push for a Fed Master Account, pioneering the move to bridge the divide between crypto and Wall Street. Unfortunately, after a three-year delay, Custodia’s application was ultimately denied by the Fed in January 2023.

ADVERTISEMENTCustodia also lost a lawsuit against the Fed alleging non-compliance with the APA (Administrative Procedure Act) by denying the Master Account. Judge Scott Skavdahl of the District Court of Wyoming dismissed Custodia’s claim to review the Fed’s APA, citing the Court’s lack of jurisdiction to “address the merits of the claim.”

The crypto custody firm has escalated the case to the 10th Circuit Court of Appeals, challenging the Reserve’s power to deny its Master Account application. Meanwhile, Ripple’s application for a Master Account brings the case back into the limelight, with industry leaders curious about whether the Fed will grant Ripple the account before Custodia.

If Ripple secures a Master Account before Custodia, it could confirm Caitlyn Long, Custodia CEO’s, fears of possible political prejudice in the agency’s affairs. Long maintains that the Fed has not stopped its selective assault against crypto and a few other sectors, despite its official rescission of various anti-crypto guidelines.

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