The Blockchain Association asked the U.S. Supreme Court on Wednesday to hear the Custodia Bank lawsuit against the Federal Reserve, challenging the central bank’s refusal to grant the crypto-focused institution a master account for direct access to the national payment system. The petition tests whether regional Federal Reserve banks hold unchecked discretion to lock digital asset companies out of standard financial infrastructure.
According to an amicus curiae brief filed by the trade group, federal law requires the central bank to make its payment services available to eligible nonmember depository institutions. The Blockchain Association argued that the Tenth Circuit Court of Appeals misinterpreted federal statutes by granting the Fed a broad, virtually unreviewable veto over state-chartered banks. The filing connects the dispute to broader regulatory friction, pointing to what the industry characterizes as the debanking of crypto firms under Operation Choke Point 2.0.
Custodia, a Wyoming-chartered special purpose depository institution founded by Wall Street veteran Caitlin Long, applied for a Federal Reserve master account in 2020 to bypass intermediary commercial banks. The Federal Reserve Bank of Kansas City rejected that application in 2023, citing risks tied to the bank’s digital asset business model. Custodia challenged the decision in federal court, but the Tenth Circuit ruled that regional Fed banks possess discretionary authority to deny such applications. In March, the appellate court voted 7-3 against rehearing the case en banc, leaving the Supreme Court as Custodia’s last avenue for review.
Regulatory Divergence in U.S. Banking Access
The Supreme Court petition lands as other digital asset firms secure alternative pathways into the federal banking architecture. In March, Kraken Financial obtained a restricted-purpose account from the Federal Reserve Bank of Kansas City, securing direct access to Fedwire despite Custodia’s earlier rejection by the same regional branch. Kraken’s setup excludes standard master account perks like interest on reserves and discount window lending facilities, yet permits direct dollar settlement.
Federal regulators have simultaneously processed national trust bank charters for other crypto companies. The Office of the Comptroller of the Currency (OCC) granted conditional approval to Coinbase in April, followed by a final charter approval for Circle in July. Payward, Kraken’s parent company, applied for a national trust charter in August. In December, the OCC conditionally approved similar national trust applications from Ripple, BitGo, Fidelity Digital Assets, and Paxos.
Traditional financial trade groups have opposed this corporate migration into banking oversight. The Independent Community Bankers of America objected to the Coinbase charter in April, arguing that technology firms seek banking privileges without assuming the comprehensive regulatory burdens imposed on conventional community banks.
Implications for the Digital Asset Industry
The Blockchain Association’s Supreme Court filing argues that letting regional Federal Reserve banks exercise sweeping discretion creates an uneven regulatory landscape where similarly situated institutions face arbitrary denials. Two dissenting judges on the Tenth Circuit previously warned that unbridled discretion at the regional bank level concentrates unchecked authority within the central banking network.
Custodia is not asking the Supreme Court to mandate the immediate issuance of a master account. Instead, the petition asks the justices to clarify whether federal law restricts the Federal Reserve’s authority to reject qualified depository applicants outright. A decision to grant certiorari would force the high court to examine the legal boundaries separating federal reserve discretion from statutory access mandates.
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