The U.S. Court of Appeals for the Tenth Circuit has denied Custodia Bank's request for a full panel rehearing, upholding a previous decision against the bank. The court's decision confirms the discretion of regional Federal Reserve banks in granting master accounts.
At the heart of the case was Custodia Bank's bid to access a Federal Reserve master account. A master account grants a bank direct access to the central bank's payment infrastructure. Without one, financial institutions must rely on intermediary banks for transfers and settlements.
Custodia Bank's Master Account Pursuit
Custodia Bank first applied for a master account with the Federal Reserve Bank of Kansas City in October 2020. The Wyoming-chartered bank aimed to serve the digital asset space and sought direct access to the Fed's payment systems.
However, the Kansas City Fed did not approve the application. After years of back-and-forth, regulators formally denied Custodia's request in early 2024. Custodia subsequently filed a lawsuit, arguing that federal law required the Federal Reserve to provide master accounts to eligible banks.
The bank claimed that being denied a master account effectively hindered its business model. According to legal filings, having a master account would allow Custodia to settle payments directly with the central bank, rather than transacting through other financial institutions.
Appeals Court Upholds Fed's Authority
The dispute eventually reached the U.S. Court of Appeals for the Tenth Circuit, which reviewed whether the Federal Reserve was legally obligated to grant the account. In its earlier ruling, a three-judge panel determined that Reserve Banks retain discretion when reviewing applications.
Custodia then asked the court to rehear the case "en banc" (by all judges), but the appeals court denied this request in March 2026. Consequently, the panel's prior interpretation stands as the controlling precedent for the circuit.
The court's order also indicated that several judges favored a rehearing. However, a majority voted against reopening the case. With the rehearing request denied, the ruling solidifies the Federal Reserve's position that it can independently assess whether an institution qualifies for direct access to its payment network.
This decision marks a significant moment in the debate surrounding access for crypto-related banking operations and highlights the regulatory hurdles faced by financial institutions built around digital asset services in the United States.