The Blockchain Association filed an amicus brief on August 12 in support of Custodia Bank's petition to the U.S. Supreme Court, urging the justices to review whether regional Federal Reserve Banks possess the authority to deny master accounts to eligible state-chartered institutions.

The Kansas City Federal Reserve Bank, which denied Custodia's master account application in January 2023, now has until September 11 to respond to the petition. The case arrives as the digital asset industry continues to navigate reduced banking access following the 2023 failures of crypto-friendly banks Silvergate and Signature Bank, events that sharpened industry concern over whether federal regulators are systematically restricting crypto firms from core payment infrastructure.

Blockchain Association Challenges Fed Discretion

Master accounts connect banks directly to Federal Reserve payment systems, the Blockchain Association explained in its filing. Without such access, institutions face higher costs, elevated risk, and dependence on intermediary banks to settle payments—a structural disadvantage that has grown more acute for digital asset firms as fewer traditional banks remain willing to serve as correspondents for crypto-sector clients.

The association argued that a ruling by the U.S. Court of Appeals for the Tenth Circuit grants regional Fed banks sweeping discretion over master account decisions. The group warned this precedent could enable regulators to deny banking services to lawful industries they disfavor.

The amicus brief centers on the legal question at the heart of Custodia's case: whether federal law permits regional Fed banks to exercise discretionary authority over eligible state-chartered depository institutions seeking access.

Custodia's Multi-Year Legal Battle

Custodia, a Wyoming-chartered bank focused on digital asset custody and payments, submitted its master account application in October 2020. Custodia operates under Wyoming's special purpose depository institution (SPDI) charter, a state-level framework established in 2019 to regulate digital asset custody and provide a defined supervisory pathway for crypto-focused banks. After the application remained pending for 19 months, Custodia filed suit against the Federal Reserve and the Kansas City Fed in June 2022, asserting that federal law mandates access for eligible depository institutions.

The Kansas City Fed formally denied the application in January 2023, citing concerns about Custodia's digital asset-focused business model.

Custodia lost at the district court level in 2024. The Tenth Circuit upheld that ruling in 2025, and the full appeals court declined to rehear the case in March 2026. Custodia subsequently filed its petition with the Supreme Court in July 2026.

The petition asks the Court to decide whether the Monetary Control Act requires regional Federal Reserve Banks to provide payment services to eligible nonmember institutions. A definitive ruling could clarify whether the 12 regional Reserve Banks must grant payment-system access to any depository institution meeting statutory criteria, or whether they retain the discretion to weigh the risk profile and business model of each applicant.

Kraken Financial Granted Limited-Purpose Account

While Custodia's case moves through the Supreme Court, the Federal Reserve Board granted Kraken Financial a limited-purpose master account in March 2026, making Kraken the first cryptocurrency-native firm to obtain such access. That the approval came through the Board of Governors in Washington rather than through a regional Reserve Bank underscores the narrow pathway that has emerged for digital asset firms—one defined by federal-level negotiation and significant conditions rather than the routine statutory access Custodia argues it is owed.

The arrangement carries significant restrictions. It does not include interest on reserves or access to emergency central bank lending facilities. The account operates under activity limits within a one-year trial period and is restricted to payment services rather than full-scope banking operations.

The Kansas City Fed's response to Custodia's Supreme Court petition is due by September 11, 2026. After briefing concludes, the Court will decide whether to grant review—a process that could extend into late 2026 or beyond.