Custodia Bank Petitions Supreme Court in 6-Year Battle Against Federal Reserve
Custodia Bank, a crypto-friendly institution, has escalated its six-year legal dispute with the Federal Reserve by filing a petition with the U.S. Supreme Court. The bank seeks to determine whether regional Federal Reserve Bank presidents have the authority to deny master accounts to financial institutions, a power Custodia claims threatens innovative business models.
Master accounts are crucial for banks to access central bank payment systems like Fedwire, FedNow, and FedACH. The Federal Reserve Board denied Custodia’s application for a master account in 2023, citing safety and soundness risks associated with its focus on crypto-assets. Custodia subsequently appealed to the 10th Circuit Court of Appeals, which sided with the Federal Reserve Bank of Kansas City in 2024.
Represented by law firm Davis Polk, Custodia argues that the denial constitutes an ‘abuse of authority’ and shifts the balance of power between state and federal banking oversight. The petition asserts that regional Fed presidents should not have unbounded, unreviewable discretion to deny payment services.
The Supreme Court is expected to decide whether to hear the case in October 2025. If accepted, the ruling could reshape the regulatory landscape for crypto-focused banks and other non-traditional financial institutions.