Blockchain Association Urges Supreme Court To Hear Custodia Fed Account Fight / Fresh Today / CUToday.info

WASHINGTON—The Blockchain Association is urging the U.S. Supreme Court to hear Custodia Bank’s challenge to the Federal Reserve’s denial of a master account, arguing federal law does not give the Fed broad discretion to deny payment system access to otherwise eligible state-chartered banks, Blockhead reported.

The group filed an amicus brief backing Custodia’s petition and arguing the case could determine how much authority Reserve Banks have to exclude lawful financial institutions from direct access to the Fed’s payment system.

Blockhead reported Wyoming-chartered Custodia applied for a master account in 2020, but the Federal Reserve Bank of Kansas City rejected the application in 2023. The Tenth Circuit subsequently ruled the Kansas City Fed had discretion to deny the account, prompting Custodia to seek Supreme Court review. A master account would allow Custodia to settle payments directly through the Federal Reserve rather than relying on an intermediary bank. The Kansas City Fed is due to respond to Custodia’s petition by Sept. 11.

The dispute comes as another Wyoming-chartered crypto institution has successfully gained Fed access. Blockhead reported in March that Kraken Financial became the first crypto-native institution to secure a Fed master account, although it received a limited, or “skinny,” account that provides direct Fedwire settlement access but does not pay interest on reserves. The Blockchain Association argues Custodia’s case extends beyond crypto, asking the Supreme Court to clarify under the Monetary Control Act whether eligible institutions have a right to Fed services or whether Reserve Banks can continue making access decisions on a case-by-case basis.