Crypto Group Backs Custodia in Supreme Court Battle Over Fed Access

The Blockchain Association has thrown its support behind Custodia Bank’s bid to have the U.S. Supreme Court review its long running dispute with the Federal Reserve over access to a master account. The crypto industry group argues that regional Federal Reserve Banks should not have unrestricted authority to deny payment system access to eligible state chartered banks.

The case could have significant consequences for digital asset firms seeking direct connections to the U.S. banking system, particularly as more crypto companies pursue regulated banking operations.

Key Takeaways

• The Blockchain Association has filed an amicus brief supporting Custodia’s Supreme Court petition.
• Custodia argues that federal law requires payment services to be available to eligible nonmember banks.
• Lower courts have ruled that regional Federal Reserve Banks retain discretion over master account applications.
• The Kansas City Fed denied Custodia’s application in 2023 after a lengthy review.
• Kraken Financial received a limited purpose master account from the same regional Fed bank in March 2026.
• The Kansas City Fed must respond to Custodia’s Supreme Court petition by September 11.

Blockchain Association Challenges Fed Discretion

The Blockchain Association filed its brief as Custodia asks the Supreme Court to examine whether the Federal Reserve has broad discretion to reject master account applications from otherwise eligible institutions. A master account provides a bank with direct access to the Federal Reserve’s payment infrastructure. For a financial institution, that can reduce dependence on correspondent banks and provide a more direct route into the U.S. payment system.

Custodia argues that the Monetary Control Act requires Federal Reserve services to be available to eligible nonmember depository institutions. The Federal Reserve, however, maintains that regional Reserve Banks have discretion to determine whether an applicant should receive an account.

The Blockchain Association says the lower court interpretation could have consequences beyond Custodia and the cryptocurrency industry.

“No lawful industry should be excluded from essential banking services through regulatory pressure or unchecked administrative discretion.”

The group argues that allowing federal regulators to exercise broad discretion over payment access could undermine the dual banking system, in which state and federal authorities both have roles in chartering and supervising banks.

Custodia’s Long Fight for a Master Account

Custodia, a Wyoming chartered Special Purpose Depository Institution founded by Caitlin Long, applied for a master account with the Federal Reserve Bank of Kansas City in October 2020. The application remained unresolved for 19 months before Custodia took legal action in 2022. The Kansas City Fed eventually rejected the application in January 2023, citing concerns surrounding Custodia’s crypto focused business model and potential risks to the financial system.

Custodia challenged the decision in federal court but lost at the district court level in 2024. The Tenth Circuit later upheld the ruling, finding that the Kansas City Fed had discretion to reject the master account request. The full Tenth Circuit subsequently rejected Custodia’s request for rehearing by a 7 to 3 vote in March 2026.

Custodia has now turned to the Supreme Court. Its petition, docketed as Custodia Bank, Inc. v. Federal Reserve Board of Governors, asks the justices to review the interpretation of federal law governing access to Federal Reserve services.

Kraken’s Fed Access Adds Pressure

The dispute has gained additional relevance following the Kansas City Fed’s decision to grant Kraken Financial a limited purpose master account in March 2026. Kraken became the first crypto native institution to receive such access, although its account comes with restrictions. It provides access to core payment infrastructure but does not provide all the privileges associated with a conventional master account, including interest on reserve balances and discount window borrowing.

The different outcomes for Custodia and Kraken have added another dimension to the debate over how crypto focused financial institutions should interact with the Federal Reserve.

For the Blockchain Association, the issue is not simply whether Custodia should receive an account. The organization argues that the Supreme Court should clarify the legal limits on the Federal Reserve’s authority so that lawful digital asset businesses are not excluded from essential financial infrastructure.

What Happens Next?

The Supreme Court has not yet agreed to hear Custodia’s case. The Kansas City Fed is expected to submit its response to the petition by September 11, after which the justices will consider whether to grant review. If the court takes the case, its eventual ruling could establish clearer boundaries around Federal Reserve master account decisions and determine how much discretion regional Reserve Banks have when evaluating state chartered institutions.

For the crypto industry, the stakes extend beyond one bank. A ruling favoring Custodia could make direct Federal Reserve access more predictable for regulated digital asset institutions, while a decision upholding broad Fed discretion would leave regional Reserve Banks with significant authority over who can connect directly to the central bank’s payment infrastructure.

Conclusion

The Blockchain Association’s intervention gives Custodia’s Supreme Court campaign broader industry backing at a critical stage. The dispute now sits at the intersection of crypto banking, state charter authority and Federal Reserve control over payment infrastructure.

Whether the Supreme Court agrees to hear the case remains uncertain, but the outcome could help define how deeply regulated digital asset businesses can integrate with the U.S. financial system.