In a closely watched case for the future of crypto banking, the U.S. Court of Appeals for the Tenth Circuit on Friday affirmed the Federal Reserve’s denial of a master account to Custodia Bank, a Wyoming-chartered Special Purpose Depository Institution (SPDI).
The 2–1 decision effectively grants the Federal Reserve Banks sweeping discretion over which institutions can access the nation’s core payments infrastructure.
Master accounts are the essential gateway to the Federal Reserve system—allowing banks to clear and settle transactions directly. Without one, even state-chartered institutions must rely on intermediary banks, undermining their independence and competitiveness.
Custodia’s case, therefore, has been widely viewed as a referendum on whether crypto-native banks can ever gain direct access to the Fed.
Custodia, which is prohibited from lending and required to maintain 100% reserves against deposits, applied for a master account in 2020. Initial signals from the Kansas City Federal Reserve appeared favorable, but after the Fed issued new access guidelines in 2022, the bank was categorized as a Tier 3 applicant, subject to the highest scrutiny, and formally denied in early 2023.
Internal emails revealed that the Federal Reserve Board had “no concerns” about the denial proceeding.
Writing for the majority, Judge David Ebel ruled that the Federal Reserve Act grants Reserve Banks discretion to decide who receives an account, interpreting statutory language such as “may receive deposits” as permissive rather than mandatory.
The court also rejected Custodia’s claims under the Administrative Procedure Act, finding that the Board’s communications were not “final agency action.”
Judge Robert Bacharach dissented, warning that the decision leaves Reserve Banks with “broad, and potentially unreviewable” power over access, an outcome with sweeping policy implications for financial innovation. Custodia said it is reviewing the ruling and weighing next steps, leaving the crypto banking community awaiting its next move.