Custodia Bank has asked the U.S. Supreme Court to take up its fight over access to a Federal Reserve master account, filing a reply brief that challenges a 10th Circuit ruling in favor of the Fed. The crypto-focused bank argues the appellate decision lets regional Federal Reserve banks deny key payment system access even when an institution is otherwise eligible.

The case has become a broader test of how much discretion regional Reserve Banks have over entry to core banking rails. Custodia says the ruling strengthens the power of unelected regional Fed officials to block what it calls “disfavored” institutions, with possible effects on banking competition and financial innovation beyond its own application.

Fight over the Monetary Control Act

At the center of the dispute is the Monetary Control Act of 1980. Custodia argues the law requires the Federal Reserve to provide payment services to eligible banks and does not leave room for regional Reserve Banks to refuse those services on discretionary grounds.

The Federal Reserve has taken a different view. According to the bank’s court filing, the Fed argues the statute does not require services to every nonmember depository institution individually, but only to such institutions “as a class.” That disagreement over the meaning of the law is now the core question Custodia wants the Supreme Court to resolve.

How the case reached the high court

Custodia started the case in 2022, alleging delays in the processing of its master account request. A federal judge ruled for the Federal Reserve, and a panel of the 10th U.S. Circuit Court of Appeals later upheld that outcome.

The appellate ruling was not unanimous. A dissenting judge warned that the decision handed regional Federal Reserve authorities discretion that could be effectively unreviewable. Custodia has seized on that split as evidence that the legal questions are substantial and unsettled.

Custodia’s argument on the stakes

In its latest filing, Custodia says the consequences extend far beyond one bank. It argues that allowing regional Reserve Banks to deny master accounts to otherwise eligible institutions weakens the U.S. dual banking system by limiting the ability of state-chartered banks to compete on equal terms.

The bank also says the ruling could chill financial innovation if access to core payment infrastructure can be withheld from institutions viewed unfavorably by regional Fed leadership. In Custodia’s telling, the issue is not only statutory interpretation but also whether regional officials can effectively decide which lawful banking models may participate in the payments system.

What happens next

Custodia says the statutory questions in the case have produced broad disagreement among jurists and that Supreme Court review is needed to settle the issue. The bank has also drawn support from lawmakers and industry groups since the lower-court decisions were issued.

The next confirmed step is whether the Supreme Court agrees to hear the case. If the justices decline review, the 10th Circuit decision will stand; if they take it up, the Court would have a chance to clarify how the Monetary Control Act applies to master account access for eligible institutions nationwide.

Source: news.bitcoin.com