Crypto Bank Custodia Loses Appeal in Fight for Fed Access

Crypto-focused bank Custodia, founded by Caitlin Long, has once again been denied access to the Federal Reserve’s payment system, following a decisive ruling from the 10th Circuit Court of Appeals.

The court upheld a previous decision against Custodia, confirming that the Federal Reserve is not obligated to provide the Wyoming-based institution with a so-called “master account.” This account would have allowed Custodia to connect directly to the Fed’s payment network—an essential step for operating like a traditional bank.

> “We conclude the plain language of the relevant statutes grants Federal Reserve Banks discretion to reject master account access requests from eligible entities,” the court stated, adding that the decision protects the Fed’s ability to “safeguard our nation’s financial system.”

Custodia first sued the Federal Reserve in 2022, claiming the central bank was dragging its feet on the application process. When the Fed ultimately rejected the request, Custodia amended its lawsuit, arguing the central bank had no legal authority to deny such applications.

A federal judge dismissed those claims last year, ruling that the Fed is not required to grant access to every depository institution. Custodia appealed, but a three-judge panel sided with the Fed in Friday’s decision.

Responding on X, Custodia said:

> “While we were hoping for a win at the \[10th\] Circuit today, we received the next best thing — a strong dissent.”

The latest ruling cited federal statutes and a legislative amendment introduced by former Senator Pat Toomey (R-Pa.), both affirming that the Fed maintains discretionary control over master account approvals.

Custodia also alleged that the Federal Reserve Bank of Kansas City and the Fed’s Board of Governors had unlawfully coordinated with the Biden administration to block its application. Both the district and appeals courts found no evidence to support those claims.

The decision marks another setback for Custodia’s long-running push to integrate digital asset banking with the U.S. financial system — and underscores the Fed’s firm stance on maintaining control over access to its payment rails.