The Blockchain Association is throwing its support behind Custodia Bank in a potentially consequential Supreme Court battle over whether the Federal Reserve can deny eligible state-chartered banks direct access to the nation’s central payment infrastructure. The crypto industry trade group filed an amicus brief supporting Custodia’s petition asking the U.S. Supreme Court to review the Fed’s refusal to grant the Wyoming-based digital asset bank a master account.
The Blockchain Association argues the dispute reaches far beyond one crypto bank. The organization says allowing regional Federal Reserve Banks broad discretion over master accounts could give federal regulators an indirect mechanism for debanking lawful industries they disfavor, including cryptocurrency companies. The case could ultimately determine how much control federal regulators have over state-chartered institutions seeking access to critical U.S. banking infrastructure.
Blockchain Association Takes Custodia’s Fight to the Supreme Court
The Blockchain Association filed its amicus brief Wednesday, asking the Supreme Court to hear Custodia’s case.
An amicus brief allows an organization that isn’t directly involved in a lawsuit to provide the court with additional legal arguments and explain why a case could have broader consequences.
The association argues that the central question is whether regional Federal Reserve Banks can deny master accounts to state-chartered banks that are legally eligible to seek Federal Reserve services.
The organization said the case is ultimately about ensuring lawful digital asset businesses can compete on equal footing and aren’t excluded from essential banking infrastructure through regulatory pressure or unchecked administrative discretion.
Why a Federal Reserve Master Account Matters
A Fed master account gives a financial institution direct access to the Federal Reserve’s payment and settlement systems.
Without one, institutions generally must rely on another bank that already has Federal Reserve access to process certain payments.
For a crypto-focused institution such as Custodia, that creates additional dependence on traditional banks — exactly the type of relationship that has become increasingly difficult for parts of the digital asset industry during previous periods of crypto-related debanking.
Custodia argues that eligible state-chartered banks should be able to access those services directly rather than depending on intermediary institutions.
Custodia Has Been Fighting the Fed Since 2020
Custodia Bank, founded by Wall Street veteran Caitlin Long, is a Wyoming-chartered Special Purpose Depository Institution focused on digital assets.
The bank applied to the Federal Reserve Bank of Kansas City for a master account in October 2020.
The application remained unresolved for more than a year, eventually prompting Custodia to sue the Federal Reserve Board and Kansas City Fed in 2022.
The Kansas City Fed ultimately denied the application in January 2023, citing concerns surrounding Custodia’s crypto-focused business model and potential safety and soundness risks.
Custodia has spent years challenging that decision.
Lower Courts Have Sided With the Federal Reserve
So far, the courts haven’t agreed with Custodia.
A Wyoming federal district court ruled in 2024 that the Federal Reserve was not legally required to provide Custodia with a master account.
Custodia appealed.
In October 2025, a three-judge panel of the U.S. Court of Appeals for the Tenth Circuit upheld the lower court’s ruling, concluding that Custodia wasn’t automatically entitled to an account and that regional Federal Reserve Banks retain discretion over master-account applications.
Custodia subsequently sought a rehearing before the full appeals court but lost that effort in a 7-3 vote, leaving the Supreme Court as its remaining path for challenging the interpretation.
The Fight Centers on One Important Phrase
At the center of the legal dispute is language contained in the Monetary Control Act.
Custodia argues that federal law says Federal Reserve services “shall be available” to eligible nonmember depository institutions.
The bank interprets that language as requiring Federal Reserve Banks to provide eligible institutions access to those services.
The Fed and lower courts have interpreted the law differently, concluding that regional Reserve Banks retain discretion when deciding whether to approve master accounts.
The Supreme Court isn’t currently being asked to simply order the Federal Reserve to give Custodia an account. Instead, Custodia wants the justices to review the legal interpretation giving regional Reserve Banks that discretion.
Blockchain Association Warns of Another Path to Crypto Debanking
This is where the case becomes particularly important for the broader cryptocurrency industry.
The Blockchain Association argues that if the lower court’s interpretation remains in place, federal regulators could potentially use access to the payment system as a powerful gatekeeping mechanism.
Rather than banning a crypto company or industry outright, regulators could make it considerably more difficult for certain businesses to participate in the traditional financial system.
The association warned that the ruling could effectively provide regulators with a blueprint for excluding industries or companies from banking infrastructure without meaningful interference from state regulators.
That argument connects the Custodia case to the broader crypto industry’s longstanding concerns about debanking.
Wyoming’s Crypto Banking Model Is Also at Stake
The dispute also raises questions about the balance of power between state and federal banking regulators.
Wyoming created its Special Purpose Depository Institution framework partly to provide regulated banking infrastructure for companies dealing with digital assets.
Custodia operates under that state-chartered system.
But a state banking charter doesn’t necessarily provide access to Federal Reserve payment infrastructure.
The Blockchain Association argues that allowing regional Fed banks broad discretion to deny master accounts can effectively allow federal institutions to override states’ decisions about which companies should be permitted to operate as banks.
That makes the case relevant beyond cryptocurrency because it could affect the relationship between state-chartered banks and the Federal Reserve more broadly.
Kraken’s Fed Access Adds Another Twist
The dispute has become even more interesting because another Wyoming crypto bank recently achieved something Custodia has spent years fighting for.
In March, Kraken Financial became the first crypto banking unit to receive a limited-purpose Federal Reserve master account, providing it direct access to Fedwire.
Notably, Kraken received that access through the Federal Reserve Bank of Kansas City — the same regional Fed bank that denied Custodia’s application in 2023.
The two cases aren’t necessarily identical, particularly because Kraken received limited-purpose access. But the development demonstrates that direct Federal Reserve connectivity for a crypto-focused institution is no longer merely theoretical.
The Supreme Court Hasn’t Agreed to Hear the Case Yet
Custodia filed its petition asking the Supreme Court to review the dispute in July.
The Blockchain Association’s filing doesn’t mean the Supreme Court will automatically hear the case. The justices must first decide whether to grant Custodia’s petition.
The Federal Reserve Bank of Kansas City is currently due to respond by September 11.
If the Supreme Court declines to hear the case, the lower court ruling would remain intact.
If the justices accept it, however, the dispute could become one of the most important crypto banking cases to reach the country’s highest court.
What This Means for Crypto
The Custodia case is about much more than whether one bank gets a Federal Reserve account.
At its core, the dispute asks who gets to decide which lawful financial institutions can directly access America’s payment infrastructure.
That distinction matters enormously for crypto.
The industry has spent years attempting to reduce its dependence on traditional banks while simultaneously needing those institutions to connect digital assets with dollars, payment networks and the broader financial system.
If regional Federal Reserve Banks have broad discretion to deny master accounts, crypto-focused state banks could remain dependent on traditional financial institutions even after receiving legitimate banking charters from state regulators.
The Blockchain Association fears that discretion could also become a powerful form of regulation through banking access, allowing regulators to restrict an industry without Congress explicitly banning it.
A Supreme Court victory for Custodia wouldn’t automatically eliminate every banking challenge facing cryptocurrency companies. But it could significantly reshape the relationship between crypto banks, state regulators and the Federal Reserve, while establishing clearer limits on who controls access to America’s core payment infrastructure.
