The post Custodia Denied Master Account In Blow To Crypto Sovereignty, Dissent Brings The Heat appeared on BitcoinEthereumNews.com.

In a 2-1 decision issued today, the Tenth Circuit affirmed the denial of a Federal Reserve master account to Custodia Bank, the Wyoming-chartered Special Purpose Depository Institution (SPDI) that has become the test case for crypto-native banking. The panel upheld the district court across the board and left Reserve Banks with broad (and potentially unreviewable, in the words of the dissent) discretion over access. Master accounts are the keys to the fiat kingdom. They’re the ledger entries that let institutions clear and settle directly at the Fed; without one, a “bank” is functionally just a vault dependent on fickle intermediaries and third-party rails. That practical choke point (which has been abused by regulators before) gives any discretion over access extraordinary policy significance. Wyoming created SPDIs to pair traditional (but fully reserved) dollar banking rails with segregated digital-asset services. Custodia, barred from making loans and required to keep dollar deposits 100% backed by high-quality liquid assets, applied for a master account in October 2020. Early signals from the Kansas City Fed were positive (“no showstoppers”), but after the Board finalized its 2022 access Guidelines, FRBKC treated Custodia as a Tier 3 applicant, the bucket that “generally receive[s] the strictest level of review,” and formally denied the account in January 2023. The Board, consulted beforehand, emailed it had “no concerns” with FRBKC communicating a denial. The Majority Opinion Writing for the court, Judge Ebel rejected Custodia’s statutory and administrative claims, and essentially granted the Federal Reserve broad, and potentially unbounded, discretion on this point. Reading the Federal Reserve Act’s § 342 (“may receive deposits”) together with the Monetary Control Act’s § 248a, the panel concluded that access decisions remain discretionary with the Reserve Banks; § 248a(c)(2)’s “shall be available” language concerns pricing and parity for services the Board prices, it doesn’t force…

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Filed under: News - @ October 31, 2025 7:25 pm