- The Blockchain Association urged the Supreme Court to review whether regional Fed banks can deny master accounts to eligible state-chartered banks.
- Custodia applied for a master account in 2020, but the Kansas City Fed rejected its application in January 2023.
- The Kansas City Fed must respond by September 11, while Kraken Financial received a limited-purpose master account in March.
The Blockchain Association filed an amicus brief on August 12 supporting Custodia Bank’s Supreme Court petition over Fed master accounts. The group asked the court to review whether regional Federal Reserve Banks can deny eligible state-chartered banks access. The Kansas City Fed now has until September 11 to respond to Custodia’s petition.
Blockchain Association Challenges Fed Discretion
According to the Blockchain Association, master accounts connect banks directly to Federal Reserve payment systems. Without them, banks can face added costs, risks, and reliance on intermediaries for payment settlement.
The group said the Tenth Circuit’s ruling gives regional Fed banks broad discretion over master accounts. It warned that the decision could allow regulators to deny banking access to lawful industries.
However, the association’s filing focuses on Custodia’s legal question. It asks whether federal law gives regional Fed banks discretion over eligible state-chartered institutions.
Custodia’s Fight Started In 2020
Custodia, a Wyoming-chartered bank focused on digital assets, applied for a master account in October 2020. The Kansas City Fed denied the application in January 2023, citing concerns about Custodia’s business model.
Custodia sued in June 2022 after the application remained pending for 19 months. The bank argued that federal law requires access for eligible depository institutions. The bank lost in district court in 2024.
The Tenth Circuit upheld that result in 2025, while the full appeals court rejected rehearing in March 2026. Custodia then petitioned the Supreme Court last month. Its petition asks whether the Monetary Control Act requires regional Fed banks to provide services to eligible nonmember institutions.
Kansas City Fed Gets More Time
The Kansas City Fed must respond to Custodia’s petition by September 11. Meanwhile, the Federal Reserve granted Kraken Financial a limited-purpose master account in March 2026. Kraken became the first crypto-native firm to receive such an account.
However, the arrangement excludes interest on reserves and emergency central bank loans. The account carries activity limits and operates on a one-year trial period. It focuses on payment services rather than full banking services.
