The Blockchain Association has asked the US Supreme Court to take up Custodia Bank’s challenge to the Federal Reserve’s refusal to grant it a master account, arguing that federal law does not give regional Reserve Banks sweeping discretion to deny access to eligible institutions.
Custodia, a Wyoming-chartered special purpose depository institution, applied for the account in 2020. After the Federal Reserve Bank of Kansas City rejected the request in 2023, the dispute moved through the courts and now turns on whether the Fed must provide payment services to qualified nonmember depository institutions under the Monetary Control Act.
What the brief argues
In its amicus filing, the Blockchain Association says the Supreme Court should review the case because the Tenth Circuit’s ruling gives the Fed too much latitude to exclude lawful businesses from core payment infrastructure. The group argues that the statute requires Federal Reserve payment services to be made available to eligible nonmember depository institutions and does not authorize broad, undefined refusal power at the regional bank level.
The association presents the issue as broader than one crypto-focused bank. Its position is that the Court should clarify the limits of Federal Reserve discretion for any eligible institution, rather than create a special rule for digital asset firms.
Why a master account matters
A Federal Reserve master account would allow Custodia to settle payments directly with the central bank. It would also provide access to Fedwire and, depending on the type of account, interest on reserves held at the Fed.
That access is at the center of Custodia’s petition. The bank is asking the Supreme Court to review the lower-court outcome after the Kansas City Fed denied its application and the appellate court concluded the regional Reserve Bank had discretion to do so.
The broader industry backdrop
The dispute is unfolding as other digital-asset-related firms pursue regulated banking footholds through different channels. The source article notes that Circle, Ripple, BitGo, Fidelity Digital Assets, and Paxos have obtained conditional trust or banking approvals without specifically needing a Fed master account.
At the same time, Kraken Financial has secured its own Federal Reserve master account, becoming the first crypto-native institution in US history to do so. Kraken CEO Arjun Sethi described that result as a convergence of crypto infrastructure and sovereign financial rails. Custodia, while congratulating Kraken, is continuing its own push for a master account while also expanding bank partnerships.
What the Supreme Court could clarify next
The legal question sharpened by these developments is whether different outcomes for similarly chartered and regulated crypto banks reflect legitimate case-by-case judgment by the Fed or an absence of meaningful legal limits on that discretion.
For now, the next confirmed step is procedural. The Federal Reserve Bank of Kansas City must respond to Custodia’s Supreme Court petition by September 11. Whether the justices decide to hear the case will determine if the dispute becomes a wider test of how much authority the Fed has to deny access to the US payment system.
Source: www.blockhead.co