Custodia Bank’s master account appeal denied by U.S. court

A U.S. appeals court upheld the Fed’s authority to deny Custodia Bank a master account, marking a setback for crypto banks seeking direct access to the central bank.

A U.S. appeals court has denied Custodia Bank’s request to reopen its legal challenge against the Federal Reserve over access to a master account. The 7-3 decision upholds a previous ruling, confirming that Federal Reserve banks have the discretion to grant or deny master accounts, which allow direct access to the central bank’s payment system. Custodia Bank, a Wyoming-chartered institution focused on digital assets, argued that eligible banks have a legal right to such accounts and raised concerns about state banking authority and constitutional issues. Despite this setback, the Federal Reserve has recently started to create new pathways for crypto firms, including granting a special limited account to a crypto exchange and developing policies for “skinny” master accounts. This court decision represents a significant development for digital asset banking and highlights the ongoing tension between innovation in crypto finance and federal regulatory oversight.