The Blockchain Association filed an amicus brief on Wednesday backing Custodia Bank’s petition to the US Supreme Court, escalating a six-year fight over whether the Federal Reserve can turn away a legally eligible state-chartered bank. The brief, docketed August 12 in case 26-62, asks the justices to decide whether regional Reserve Banks hold discretionary power to reject master account applications from institutions that already meet the eligibility test written into the Monetary Control Act. A Fed master account is a settlement account at a regional Reserve Bank that lets a financial institution move dollars directly through central bank payment rails instead of renting access from a correspondent bank.
Key takeaways
- The Blockchain Association filed an amicus brief on August 12 supporting Custodia Bank’s Supreme Court petition, docket 26-62.
- The petition asks whether the Monetary Control Act lets regional Reserve Banks deny master accounts to eligible nonmember institutions at their own discretion.
- The same Kansas City Fed that rejected Custodia in January 2023 granted Kraken Financial a limited-purpose master account in March 2026.
- The Kansas City Fed must file its response by September 11, after which the justices decide whether to hear the case.
Published: August 13, 2026 09:30 UTC
Six years of denials
Custodia applied for a master account in October 2020 and has not received one since. The bank is a Wyoming special purpose depository institution founded by former Morgan Stanley managing director Caitlin Long. A special purpose depository institution is a Wyoming charter that takes dollar deposits and custodies digital assets but cannot lend against those deposits, which means it must hold reserves rather than run a fractional balance sheet.
Custodia sued the Kansas City Fed in June 2022, initially over a 19-month processing delay. The Reserve Bank formally denied the application in January 2023, citing the bank’s crypto-focused business model. Custodia lost in federal district court in Wyoming in 2024, then lost again at the Tenth Circuit on October 31, 2025. The full appeals court denied a rehearing 7-3 in March 2026. The cert petition followed in July.
The debanking argument
The Blockchain Association’s central claim is that the lower court rulings hand federal regulators a tool that reaches well past crypto. The brief warns that those decisions offer “a blueprint for federal regulators to debank disfavored industries or companies in the future without interference from state regulators.”
In a thread on X, the trade group framed the stakes in industry-neutral terms: “No lawful industry should be excluded from essential banking services through regulatory pressure or unchecked administrative discretion.” It described the case as being about whether “lawful digital asset businesses can compete on equal footing.”
The association is not new to this fight. It filed a similar brief at the district court stage in January 2024, arguing then that the Fed’s refusal undercut the dual banking system that lets states charter their own institutions. The Wyoming Secretary of State has filed separately, arguing the district court opinion lets the Fed erode state sovereignty without an act of Congress.
Kraken already has one
The most awkward fact for the Fed’s position is that the Kansas City Fed granted a crypto-native firm a master account five months ago. Kraken Financial received a limited-purpose account in March 2026, the first for a crypto company, giving it access to core payment rails used for high-value dollar settlement. The arrangement carries restrictions, including no interest paid on reserves.
Representative Maxine Waters questioned the Kansas City Fed over that approval in March. Two firms in the same business, applying to the same Reserve Bank, received opposite answers. That gap is the practical version of the legal question the justices are being asked to resolve.
What happens next
The Kansas City Fed’s response to the petition is due September 11, which puts a cert decision in the autumn at the earliest. The Supreme Court grants review in a small fraction of petitions, and a denial would leave the Tenth Circuit ruling as controlling law across six states, including Wyoming.
The petition lands in a crowded regulatory month. The SEC is scheduled to vote Friday on its Regulation Crypto proposal, and the CLARITY Act is moving through the Senate. Neither addresses master accounts. Firms that want dollar settlement without a Fed account have been routing around the problem through state trust charters instead, the path Circle took in New York this month. A cert grant would put the underlying access question in front of the only court that can settle it.
Frequently asked questions
What is a Fed master account?
A master account is a settlement account held directly at a regional Federal Reserve Bank. It lets an institution send and receive dollars over Fedwire and other central bank payment systems without going through a correspondent bank, which removes a layer of cost, delay and counterparty risk.
Why was Custodia denied?
The Kansas City Fed rejected the application in January 2023, citing risks tied to Custodia’s crypto-focused business model. Custodia argues the Monetary Control Act says the Fed shall provide services to eligible nonmember institutions, leaving Reserve Banks no room to refuse an applicant that qualifies.
When will the Supreme Court decide whether to hear the case?
The Kansas City Fed must respond to the petition by September 11, 2026. The justices then consider the petition in conference. A decision on whether to grant review would likely come in the autumn, and most petitions are denied without comment.
