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A Wyoming-based crypto bank’s four-year fight for a bank account at the Federal Reserve just picked up a powerful ally. The Blockchain Association has filed an amicus brief backing Custodia Bank’s petition to the Supreme Court, arguing that regional Fed banks should not have unchecked power to shut lawful crypto firms out of the payment system. At the heart of the case is a question that could reshape Fed master account access for every digital asset company trying to plug into the traditional banking system: does a regional Federal Reserve Bank have the discretion to deny a state-chartered, eligible institution the account it needs to move money?
Key takeaways
- The Blockchain Association filed an amicus brief on Wednesday supporting Custodia Bank’s Supreme Court petition over Fed master account access.
- The Kansas City Fed denied Custodia’s application in January 2023, citing concerns tied to its crypto-related business model.
- Custodia lost in district court in 2024 and at the 10th Circuit in 2025; a full rehearing was denied 7-3 in March 2026.
- Custodia petitioned the Supreme Court in August 2026, and the Kansas City Fed must respond by September 11.
- Kraken Financial received a limited-purpose master account from the Kansas City Fed in March 2026, becoming the first crypto-native firm to hold one.
Blockchain Association Supports Custodia Bank’s Supreme Court Petition
The trade group is asking the Supreme Court to decide whether Fed banks can legally reject eligible, state-approved banks from the payment system without meaningful oversight. In its Wednesday filing, the Blockchain Association urged the justices to take up Custodia’s case and clarify the limits of regional Fed discretion over master account approvals.
Amicus Brief Urges Review of Federal Reserve Discretion
The brief goes further than a simple show of support. The association warned that the lower court rulings against Custodia effectively hand federal regulators “a blueprint for federal regulators to debank disfavored industries or companies in the future without interference from state regulators.” That phrase captures the industry’s central worry: if this precedent stands, any regional Fed bank could sideline an entire sector on discretionary grounds, with little recourse for the businesses affected.
Industry Call for Equal Access to Banking Services
In a thread of posts on X, the Blockchain Association framed the fight in broader terms, writing that “no lawful industry should be excluded from essential banking services through regulatory pressure or unchecked administrative discretion.” The group added that the case is ultimately about making sure “lawful digital asset businesses can compete on equal footing” with traditional financial institutions.
Significance of Fed Master Accounts for Crypto Banks
A Fed master account matters because it is the plumbing that connects a bank directly to the central bank’s own payment infrastructure. Without one, a financial institution has to rely on a correspondent bank as a middleman, adding cost, delay and a dependency that crypto-focused firms have found hard to secure.
Direct Access to Central Bank Payment Systems
Holding a Fed master account gives an institution direct connectivity to the central bank’s payment systems, letting it settle transactions without routing through another commercial bank. For a firm serving digital asset clients, that direct link is treated as core infrastructure, not a convenience.
Implications for Digital Asset Businesses
Denial of that access, in effect, keeps a crypto-focused bank at arm’s length from the financial system’s fastest and most reliable settlement rails. That is precisely the gap Custodia has spent years trying to close in court, and it is the same gap the Blockchain Association says threatens equal treatment for the wider digital asset industry.
Custodia Bank’s Multi-Year Legal Battle with the Kansas City Fed
Custodia’s case traces back six years, and it has lost at every stage so far — a record that makes its Supreme Court petition the industry’s last realistic shot at overturning the denial.
Initial Application and Denial
Custodia Bank, a Wyoming-chartered institution founded by Wall Street veteran Caitlin Long, first applied for a master account in October 2020. The Kansas City Fed sat on the request for roughly 19 months before ultimately denying it in January 2023, citing concerns about Custodia’s crypto-related business model.
Lower Court Decisions Against Custodia
Custodia had already sued the Kansas City Fed back in June 2022, initially over the processing delay itself and later on the broader argument that federal law requires the Fed to serve eligible institutions regardless of their business line. The results were consistently unfavorable: Custodia lost in district court in 2024, then lost again at the 10th Circuit Court of Appeals in 2025. When the bank sought a full rehearing, the appeals court denied it in a 7-3 decision handed down in March 2026.
Supreme Court Petition and Pending Response
Custodia petitioned the Supreme Court in August 2026, asking the justices to settle whether the Monetary Control Act — which states the Fed “shall” provide services to eligible nonmember institutions — actually gives regional Fed banks discretionary authority to turn qualified applicants away. The Kansas City Fed is due to respond to that petition by September 11, a deadline that will determine whether the case moves toward a full Supreme Court review.
Precedent Set by Kraken Financial’s Limited-Purpose Master Account
Custodia’s setbacks stand in sharp contrast to what happened just months before its Supreme Court filing. In March 2026, the Kansas City Fed granted Kraken Financial a limited-purpose master account, making it the first crypto-native firm to hold one.
Details of Kraken Financial’s Fed Master Account
Kraken’s account gives it access to core payment rails used for high-value dollar settlement, a setup that could speed up deposits and withdrawals for institutional clients. The arrangement is not unrestricted, though — it comes with limits, including no access to interest on reserves.
Comparison to Custodia’s Application
The contrast raises an obvious question for observers watching how crypto bank payment systems connect to the Fed: why did one crypto-focused firm secure a limited-purpose account while another, pursuing full access for years, kept losing in court? The Blockchain Association’s brief leans on that gap as evidence that Fed decision-making on master accounts lacks consistent, transparent criteria — a point the Supreme Court petition is designed to force into the open.
Why this matters beyond Custodia’s own balance sheet is straightforward: if the Supreme Court declines to hear the case, or rules that regional Fed banks retain broad discretion, the Blockchain Association’s warning about a “blueprint” for debanking would carry real weight for any regulated industry that falls out of favor with a particular administration or agency. Conversely, a ruling that narrows that discretion could open the door for more digital asset firms to pursue direct Fed access rather than relying on intermediary banks — reshaping how blockchain banking regulation and Fed oversight intersect going forward.
FAQ
What is the significance of a Federal Reserve master account for a crypto bank?
A Fed master account provides banks direct access to the central bank’s payment systems, which is essential infrastructure for serving digital asset clients without relying on a correspondent bank as an intermediary.
Why was Custodia Bank’s master account application denied by the Fed?
The Kansas City Fed denied Custodia’s application in January 2023, citing concerns about the bank’s crypto-related business model.
What legal steps has Custodia taken after the denial of its master account application?
Custodia sued the Kansas City Fed in June 2022, lost in lower courts through 2026 — including a 7-3 rehearing denial by the full 10th Circuit — and petitioned the Supreme Court in August 2026 to review the Fed’s discretion.
How does Kraken Financial’s master account differ from Custodia’s situation?
Kraken Financial received a limited-purpose master account in March 2026, giving it access to core payment rails but with restrictions, including no interest on reserves, unlike Custodia, whose application for full access was denied outright.
Article produced with the assistance of artificial intelligence and reviewed by the editorial team.
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