Digital asset bank Custodia has taken its legal battle to the next level by filing a notice of appeal following a recent ruling by a Wyoming judge denying the bank access to a Federal Reserve master account.

Custodia's legal team lodged the notice of appeal in the U.S. District Court for the District of Wyoming, marking the latest development in a prolonged dispute over the bank's eligibility to utilize the central bank's payment systems.

In a judgment issued in March, Judge Scott Skavdahl underscored the discretionary authority of Federal Reserve Banks in granting master accounts. These accounts provide direct access to the Fed's payment systems, offering financial institutions the most direct connection to the U.S. money supply. Entities lacking master accounts often must rely on partner banks with such accounts to facilitate transactions.

Judge Skavdahl remarked in last month's ruling that Custodia's assertion, if upheld, would imply that every state-chartered depository institution, regardless of its regulatory framework, is entitled to a master account, thus enabling direct access to the federal financial system.

The legal saga traces back to Custodia's 2020 application for a master account with the Kansas City Fed. Following intervention by the Federal Reserve Board of Governors in spring 2021, Custodia initiated legal action against both the Federal Reserve Board of Governors and the Federal Reserve Bank of Kansas City in 2022 for the delay in processing its master account application.

Despite these efforts, Custodia's bid for a master account was ultimately rejected in January 2023.

Operating under Wyoming law, Custodia is categorized as a special purpose depository institution, enabling it to receive deposits and provide custody services, among other activities. However, such institutions are prohibited from lending customer fiat deposits and are required to maintain 100% reserves on these deposits, as outlined on Custodia's website.