Blockchain Association Asks Supreme Court to Clarify Fed's Master Account Discretion

The Blockchain Association has filed an amicus brief urging the US Supreme Court to hear Custodia Bank's challenge to the Federal Reserve's denial of a master account. The association argues that federal law requires the Fed to make its payment services available to eligible nonmember depository institutions and that regional Reserve Banks should not have broad discretion to refuse.

Custodia, a Wyoming-chartered special purpose depository institution, applied for a master account in 2020 but was rejected by the Federal Reserve Bank of Kansas City in 2023. The Tenth Circuit Court of Appeals later ruled that the regional Fed bank had discretion to deny the request, which Custodia is now asking the Supreme Court to review.

A master account would allow Custodia to settle payments directly with the central bank rather than routing through an intermediary bank, along with access to Fedwire and interest on reserves held at the Fed. The Blockchain Association's brief frames the stakes beyond Custodia specifically: allowing the appeals court's ruling to stand would give the Fed effectively unchecked power to exclude any lawful industry from the payment system through administrative discretion rather than a defined legal standard.

The case is not as simple as crypto being locked out of the banking system, as another Wyoming-chartered crypto bank, Kraken Financial, secured its own Fed master account in March. However, Custodia congratulated Kraken on the approval while noting it would continue pursuing its own master account in parallel with expanding bank partnerships.