US Appeals Court Backs Fed’s Decision to Deny Custodia Bank a Master Account

A federal appeals courtroom in Denver has upheld the Federal Reserve’s proper to deny crypto-focused financial institution Custodia entry to a grasp account, delivering a main blow to the Wyoming-based establishment’s years-long push to achieve direct entry to the US central banking system.

In a 2–1 ruling, the Tenth Circuit Court of Appeals agreed with a decrease courtroom that the Fed has discretion over which monetary establishments can maintain grasp accounts, which permit direct entry to Fed providers reminiscent of cost clearing and wire transfers.

The courtroom concluded that whereas Custodia is technically eligible, eligibility doesn’t assure entitlement.

Judge Says Fed Has Right to Deny Custodia to ‘Safeguard Financial System’

Writing for almost all, Judge David Ebel, appointed by former President Ronald Reagan, stated the legislation provides the Fed authority to “reject grasp account entry requests from eligible entities” so as to defend monetary stability.

“We reject Custodia’s try to impair the Fed’s potential to safeguard our nation’s monetary system via the train of discretion,” Ebel wrote.

Custodia, which operates underneath Wyoming’s Special Purpose Depository Institution (SPDI) constitution, argued that it’s being unfairly excluded from the nationwide banking community regardless of assembly the required standards.

The Federal Reserve Bank of Kansas City, nonetheless, decided that Custodia’s enterprise mannequin, centered on custody and settlement of crypto belongings, posed “undue threat” to the broader monetary system.

In a dissenting opinion, Judge Timothy Tymkovich, appointed by President George W. Bush, argued that the Fed’s personal statutes mandate it to present cost providers to all eligible non-member banks, together with Custodia.

“This case comes clothed in Twenty first-century phrases: cryptocurrency, digital belongings, immediate wire transfers, and grasp accounts,” he wrote. “But there’s nothing new about this difficulty.”

Custodia known as the choice “disappointing” however pointed to Tymkovich’s dissent as validation of its place.

“We had been hoping for a win on the Tenth Circuit right this moment, however we acquired the following neatest thing — a robust dissent,” the financial institution stated, including that it could search a rehearing primarily based on a conflicting ruling in a associated case.

Statement of @custodiabank: pic.twitter.com/6U0FPzaKCm

— Custodia Bank (@custodiabank) October 31, 2025

The determination leaves Custodia, and different crypto-oriented monetary establishments, nonetheless locked out of direct entry to the US funds infrastructure. So far, no crypto-focused financial institution has acquired a grasp account.

Fed Governor Floats ‘Skinny’ Master Accounts for Crypto-Focused Banks

Notably, the regulatory panorama might quickly shift.

As reported, the Federal Reserve plans to open its payment network to stablecoin issuers and fintech companies with out requiring them to companion with conventional banks, a important coverage reversal after years of hesitation towards crypto.

Fed Governor Christopher Waller introduced final week that the proposal throughout the central financial institution’s Payments Innovation Conference on October 21, introducing new “cost accounts” or “skinny grasp accounts” for legally eligible establishments.

These limited-access accounts would join companies straight to the Fed’s cost rails whereas sustaining strict safeguards to cut back systemic threat.

Under the proposal, collaborating companies would face stability caps, no curiosity on deposits, and no overdraft privileges, making certain minimal publicity for the Fed’s stability sheet.

Waller stated the brand new construction goals to preserve the central financial institution aggressive with speedy innovation in funds.

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