Crypto Group Supports Custodia in Supreme Court Fight for Fed Access

A pro-crypto industry group has asked the U.S. Supreme Court to take up Custodia Bank’s challenge to how the Federal Reserve handled its request for direct access to the central bank’s payment system. In an amicus brief filed Wednesday, the Blockchain Association argued that federal law obliges the Fed to provide payment services to eligible nonmember banks and that the central bank should not be allowed to effectively block access through broad discretion.

The dispute centers on whether the Federal Reserve can deny a “master account” application for a state-chartered bank that wants direct connectivity to Fed payment rails, without routing transactions through an intermediary institution. Custodia, a Wyoming-chartered bank focused on digital assets, has maintained that the Fed’s refusal prevented it from operating as independently as other eligible banks.

Key takeaways

• The Blockchain Association urged the U.S. Supreme Court to review Custodia Bank’s bid for a Fed master account after lower-court decisions left the bank with few options.
• In its amicus brief, the group argued federal law requires the Fed to offer payment services to eligible nonmember banks and limits the Fed’s ability to deny access.
• The brief also linked Custodia’s fight to broader concerns about regulators discouraging banking relationships with crypto firms, referencing “Operation Choke Point 2.0.”
• The case lands amid a wider trend of some crypto-related firms obtaining varying levels of U.S. banking access, including limited-purpose Fedwire access for Kraken Financial.
• Traditional banking groups have pushed back on these developments, warning that crypto firms may be seeking bank benefits without full obligations.

Supreme Court petition takes aim at Fed discretion

According to the Blockchain Association’s amicus brief, the Federal Reserve’s approach—and the way the Tenth Circuit interpreted it—creates a practical “veto” over whether state-chartered banks can access essential payment-system services. The association’s core argument is that the law governing the Fed’s obligations does not contemplate an open-ended power to refuse services to eligible nonmember institutions.

The industry group said the appellate decision effectively expands the Fed’s discretion beyond what Congress intended, allowing the central bank to withhold the infrastructure needed for a bank to function independently. Custodia’s lawsuit has been framed around the idea that direct access to Fed systems is a prerequisite for operational independence, rather than a discretionary privilege.

The Blockchain Association also tied the matter to concerns about alleged “crypto debanking.” In doing so, it pointed to regulator behavior it characterized as part of “Operation Choke Point 2.0,” an issue that has been discussed in U.S. policy debates around whether financial regulators have pushed banks away from serving the digital asset industry. Earlier coverage from Cointelegraph noted the broader “Operation Choke Point 2.0” narrative in the context of how federal regulators may influence banking relationships (see this Cointelegraph report).

Custodia’s path through the courts

Custodia applied for a Fed master account in 2020, seeking direct access to the central bank’s payment services rather than depending on an intermediary bank. The Federal Reserve Bank of Kansas City denied the request in 2023. A subsequent ruling by the Tenth Circuit held that the regional Fed bank had discretion to reject Custodia’s application.

In March, the appeals court voted 7-3 against rehearing the case, leaving the U.S. Supreme Court as Custodia’s remaining avenue for potential review. The Blockchain Association’s filing argues that the Tenth Circuit’s reading of the Fed’s authority is too expansive—particularly as it relates to eligible state-chartered institutions seeking to access payment rails directly.

For investors and industry participants, the practical stakes of the dispute go beyond one bank. If the Supreme Court were to narrow how the Fed can interpret its obligations to eligible nonmember banks, it could reshape the legal boundaries for future master account requests—potentially altering how crypto-focused and other specialized banks plan for payments connectivity.

Why the timing matters: more crypto banking access, but not uniform

Custodia’s legal challenge is unfolding as some crypto firms have improved their access to parts of the U.S. banking system. The Blockchain Association’s filing arrives during a period when regulators have approved various structures—federal charters, limited-purpose arrangements, and trust or custody-focused banking entities—each with different capabilities and constraints.

In March, Kraken Financial became the first crypto banking unit to receive a limited-purpose master account from the Federal Reserve Bank of Kansas City, according to Cointelegraph’s reporting. That approval granted direct access to Fedwire for Kraken Financial (see Cointelegraph’s coverage). The approval contrasts with Custodia’s denial by the same regional Fed bank in 2023, highlighting how access outcomes may differ even within the same regional Fed framework.

Beyond Fedwire connectivity, the sector has also seen changes in federal oversight of custody and related services. In April, Coinbase received conditional approval from the Office of the Comptroller of the Currency (OCC) to establish a national trust company, bringing its custody business under federal oversight without retail deposit-taking or full commercial banking operations (see this Cointelegraph report). Circle later received final OCC approval for a national trust bank in July, while Kraken parent Payward applied for a national trust company charter the following month.

Cointelegraph’s reporting also notes that the OCC conditionally approved national trust bank applications from Ripple, BitGo, Fidelity Digital Assets and Paxos in December (see the related Cointelegraph coverage embedded in the original article text). While these developments do not automatically resolve master account disputes, they underscore that parts of the banking system have been opening to crypto firms—at least for certain regulated structures.

Backlash from community banks underscores policy tension

Resistance from traditional banking organizations has accompanied these approvals. The Independent Community Bankers of America opposed Coinbase’s national trust charter approval in April, arguing that crypto companies are seeking the benefits associated with bank charters while avoiding the full regulatory framework applied to traditional banks (see Cointelegraph’s report).

This tension matters for Custodia’s case because it reflects a wider debate over how to classify and regulate crypto-related banking activities. The Blockchain Association’s brief frames the master account issue as one about legal eligibility and regulatory consistency. Opponents, meanwhile, have raised concerns about regulatory asymmetry—where crypto institutions may access certain permissions while not facing the same obligations as conventional banks.

With the Supreme Court as the next potential forum, the central question will likely be less about crypto policy in the abstract and more about statutory interpretation: what the Fed must do for eligible nonmember banks, and what discretion it actually retains when granting or denying access to payment rails.

Readers should watch for whether the Supreme Court agrees to hear Custodia’s petition and, if it does, how the justices approach the scope of the Fed’s discretion over payment-system access. The outcome could set a clearer rule for future master account requests—potentially affecting how quickly other specialized banks, including crypto-focused institutions, can plan for direct participation in U.S. payment infrastructure.