The Blockchain Association has urged the US Supreme Court to take up Custodia Bank’s challenge to the Federal Reserve’s refusal to grant it a master account, placing a long-running dispute over direct access to the country’s core payment infrastructure before the nation’s highest court.
In an amicus brief filed Wednesday, the cryptocurrency trade group backed Custodia’s petition for Supreme Court review and asked the justices to clarify whether regional Federal Reserve banks can deny master-account applications from state-chartered institutions that otherwise qualify for Federal Reserve services. The Kansas City Federal Reserve Bank must respond to Custodia’s petition by September 11.
Custodia’s case centers on the Monetary Control Act, the federal law requiring the Federal Reserve to provide certain services to eligible depository institutions, including nonmember banks. Custodia argues that the statute leaves regional Reserve Banks with limited discretion to withhold a master account from a properly chartered and supervised state bank. The Federal Reserve has maintained that it retains authority to assess the risks posed by applicants before granting access.
A master account would allow a bank to settle payments directly through Federal Reserve systems rather than relying on a correspondent bank. For a digital-asset-focused institution, that access could reduce reliance on traditional banking partners for dollar payments, wire transfers and other settlement functions.
Custodia’s dispute has stretched across four years
Custodia, a Wyoming-chartered special-purpose depository institution founded by Caitlin Long, applied to the Kansas City Fed for a master account in October 2020. Long previously worked in Wall Street finance before founding Custodia, which was designed to offer banking and custody services connected to digital assets.
The Kansas City Fed did not issue a decision for roughly 19 months. Custodia sued in June 2022, initially challenging the delay and later expanding its complaint after the Reserve Bank formally denied the application in January 2023.
The denial cited concerns connected to Custodia’s proposed crypto-related business model. Federal regulators had become increasingly vocal during that period about risks associated with digital-asset deposits, volatile funding sources, anti-money-laundering controls and the operational demands of banks serving crypto companies.
Custodia responded that it had been chartered and supervised under Wyoming law and that the Federal Reserve could not use its master-account process to impose an additional, open-ended licensing standard on a state bank. The bank has argued that denying direct access effectively limits the practical value of its state charter and forces it to depend on established banks that can decide whether to provide correspondent services.
A federal district court ruled against Custodia in 2024. The US Court of Appeals for the Tenth Circuit also rejected the bank’s argument in 2025, holding that the statutory language cited by Custodia did not require the Federal Reserve to issue a master account in every case. In March 2026, the full Tenth Circuit declined to rehear the case in a 7-3 vote, clearing the way for Custodia’s Supreme Court petition.
Blockchain Association warns of uneven access
The Blockchain Association’s brief frames the case as a question that reaches beyond Custodia and the digital-asset sector. The organization argued that access to Federal Reserve payment services should not depend on varying standards applied by individual regional Reserve Banks when a bank has already received a state charter.
The Federal Reserve System includes 12 regional Reserve Banks, which process master-account applications while operating within the broader Federal Reserve framework. That structure has produced criticism from companies and state regulators who argue that applicants can face lengthy reviews with limited visibility into how decisions are made.
The trade group’s intervention does not guarantee that the Supreme Court will hear the case. The court receives thousands of petitions each term and accepts only a small share. Custodia will need to persuade the justices that its dispute presents an unresolved question of federal law with consequences beyond one bank’s application.
The Kansas City Fed’s September 11 response will give the court the central bank’s opportunity to explain why the lower-court rulings should stand. If the Supreme Court declines review, the Tenth Circuit’s decision remains binding in the states covered by that court, including Wyoming, where Custodia is chartered.
Kraken Financial received a narrower form of access
The dispute has become more complicated following a separate decision involving Kraken Financial, another Wyoming-chartered institution with ties to the cryptocurrency sector. In March 2026, the Kansas City Fed granted Kraken Financial a limited-purpose master account, described as the first crypto-native firm to receive such an arrangement.
That account provided access to core Federal Reserve payment rails used for high-value dollar settlement, but it came with restrictions. Kraken Financial was not granted access to interest on reserve balances, one of the features available to conventional master-account holders. The arrangement also did not provide the full range of Federal Reserve functions available to traditional banks.
The Kraken decision suggests that the Kansas City Fed can distinguish between types of access and attach conditions to accounts involving digital-asset institutions. For Custodia, though, a limited framework does not resolve the legal question in its petition: whether an eligible institution can be denied a standard account altogether under the Monetary Control Act.
That distinction could shape how state-chartered crypto banks are built. A full master account can support direct settlement and reduce dependence on correspondent banks. A restricted account may offer payment access while leaving an institution without some of the balance-sheet and liquidity tools available to more conventional banking firms.
A ruling could define limits on Reserve Bank discretion
Custodia’s appeal puts two competing views of bank regulation before the Supreme Court. Custodia and its supporters contend that state banking charters should carry meaningful access to the federal payment system when statutory eligibility requirements are met. The Federal Reserve’s position, as reflected in the litigation, gives Reserve Banks discretion to deny access based on safety, soundness and policy concerns.
A ruling for Custodia could narrow the ability of regional Fed banks to use master-account review as a gatekeeping mechanism for state-chartered institutions, including firms whose models involve digital assets. A ruling for the Kansas City Fed would reinforce the central bank’s authority to evaluate applicants individually, even when they hold a valid state charter.
The case also arrives after years in which crypto businesses have faced uneven access to ordinary banking services. Several companies have relied on a limited number of financial institutions willing to handle deposits, dollar settlement and payment flows linked to token markets. Direct Federal Reserve access would not eliminate the banking rules applicable to crypto firms, but it could change who controls the final connection to the payment system.
For now, Custodia’s petition remains at the threshold stage. The Supreme Court has not decided whether to hear the case, and the September 11 response deadline is a procedural milestone rather than a final ruling. The outcome will determine whether the court addresses a statutory question that could set the boundaries of direct Federal Reserve access for state-chartered digital-asset banks.
Explore how regulation shapes crypto banking and payment rails in our guide to TradFi vs DeFi and stay ahead.
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