Custodia Loses Fed Master Account Challenge as Kraken Wins Limited Access

A Federal Reserve master account gives a bank direct access to payment and settlement rails including Fedwire, FedNow and FedACH. Wyoming-chartered digital-asset lender Custodia Bank applied to the Federal Reserve Bank of Kansas City in October 2020 but was denied in January 2023 over safety and soundness concerns tied to its crypto-focused model. The dispute tests whether regional Reserve Banks can effectively override state chartering decisions by withholding access to critical financial infrastructure.

Custodia filed a petition for a writ of certiorari with the U.S. Supreme Court on July 10, 2026, challenging a Tenth Circuit ruling that regional Reserve Banks have discretion to reject master-account applications. The Blockchain Association filed an amicus brief on Aug. 12, warning that such authority could be used to squeeze lawful digital-asset businesses out of the banking system. The deadline for the Federal Reserve Board and the Federal Reserve Bank of Kansas City to respond has been extended to Sept. 11.

Digital-asset bank Custodia applied to the Federal Reserve for a master account in October 2020, seeking direct access to the U.S. dollar payment system without relying on intermediaries. The Fed rejected the application, citing the high risks posed by the bank’s business model. At issue is whether the Fed has authority, immune from judicial review, to approve or deny accounts for state-chartered banks—a question with direct implications for the future of the cryptocurrency industry and emerging digital banks.

After losing several rounds in court, Custodia formally petitioned the U.S. Supreme Court in July 2026 to challenge a March ruling by the U.S. Court of Appeals for the Tenth Circuit. The appeals court voted 7–3 to uphold the Fed’s denial. The Supreme Court is expected to decide in October 2026 whether to hear the case, which has become a landmark clash between traditional finance and the crypto industry.