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Custodia Bank Loses Case For Rehearing Over Fed Master Account – Details

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Crypto financial institution Custodia has misplaced one other authorized battle in its marketing campaign to overview the Federal Reserve’s place as the ultimate authority over granting grasp accounts. This growth comes after the US Court of Appeals for the Tenth Circuit rejected the Caitlin Long-led digital financial institution’s request for rehearing after an preliminary favorable ruling for the Federal Reserve in October 2025.

Custodia Loses 6-Year Legal Battle With FRBKC 

In 2023, the Federal Reserve Bank of Kansas City (FRBKC) rejected Custodia’s utility for a grasp account, a designation that might have granted the crypto financial institution entry to the Fed’s fee rails, thus eliminating the necessity for middleman providers. Notably, Custodia challenged this determination at a Wyoming district court docket in 2024, claiming its eligibility for a grasp account as a nonmember depository establishment, whereas additionally stating the FRBKC lacked the constitutional authority to disclaim its utility, having happy the necessities. 

Following an preliminary defeat at this state court docket, Custodia moved its case to the US Court of Appeals for the Tenth Circuit, the place a three-man panel additionally sided with the Federal Reserve, reinforcing the central banks as the ultimate authority to grant a grasp account whatever the candidate’s eligibility. In December 2025, the crypto financial institution filed for a petition for an en banc listening to that would come with a full ten-member panel. However, a report by impartial editor Eleanor Terrett states the appellate court docket has chosen to uphold the preliminary ruling in favor of the FRBKC.

 

 

Further particulars point out that the judgment was reached by a 7-3 vote, with the vast majority of the panel agreeing that the Federal Reserve holds closing authority over such account-designation issues.  Notably, dissenting judges Timothy Tymkovich and Allison Eid warned that granting Federal Reserve banks unchecked authority to simply accept or deny purposes from state-chartered establishments contravened the Monetary Control Act of 1980.

What Next For Custodia? 

In phrases of its subsequent actions, Custodia is inside its rights to take the case to the US Supreme Court. However, the chances of the nation’s apex court docket granting such evaluations are low. Alternatively, the crypto financial institution can search to use for the particular restricted grasp account not too long ago granted by the FRBKC to crypto change Kraken. Although this differs from commonplace grasp accounts, they each have related options that would ease operations for Custodia. 

At the time of writing, Custodia has but to subject any official response to the Appellate Court’s current ruling.  

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