The Blockchain Association has thrown its support behind Custodia Bank as the Wyoming-chartered digital asset institution escalates its Federal Reserve master account dispute to the U.S. Supreme Court. The trade group argues that regional Federal Reserve Banks should not have unfettered authority to deny eligible state-chartered banks direct access to the nation's payment systems — a case with potentially far-reaching implications for how digital asset banks connect with core U.S. financial infrastructure.

A Federal Reserve master account grants a depository institution direct access to payment rails such as Fedwire and the Automated Clearing House (ACH) network, enabling real-time settlement without reliance on a third-party correspondent bank. For digital asset banks, that direct connectivity is especially consequential because correspondent banking partners have grown increasingly scarce as traditional financial institutions reduce exposure to cryptocurrency-related clients.

Blockchain Association Files Amicus Brief

The Blockchain Association filed an amicus brief backing Custodia's petition for Supreme Court review, challenging lower court rulings that granted regional Reserve Banks broad discretion over master account applications. The organization is urging the justices to define clear limits on that discretion under federal banking law.

Custodia contends that the Monetary Control Act of 1980 requires Federal Reserve services to remain available to eligible nonmember depository institutions. The statute was originally enacted to ensure equitable access to Federal Reserve payment services across all federally insured depository institutions, regardless of Federal Reserve membership. Lower courts, however, ruled that Reserve Banks retain the authority to decide whether even qualified applicants receive master accounts. Custodia is now asking the Supreme Court to review that legal interpretation rather than rule on the bank's individual eligibility.

The Blockchain Association emphasizes that the stakes extend well beyond a single Wyoming-chartered digital asset bank. According to the group, unchecked Reserve Bank discretion could effectively cut off lawful industries from essential financial infrastructure. The association argues that state-chartered banks satisfying all legal access requirements should receive consistent and predictable treatment.

Custodia's Six-Year Regulatory Battle

Custodia obtained its Wyoming Special Purpose Depository Institution (SPDI) charter — a state-level banking license created by Wyoming lawmakers in 2019 specifically for digital asset businesses — before seeking a master account from the Federal Reserve Bank of Kansas City. The bank submitted its application in October 2020 and subsequently challenged prolonged delays in the review process. After the application remained unresolved for 19 months, Custodia sued federal authorities in June 2022.

The Kansas City Fed denied Custodia's application in January 2023, citing the bank's digital asset-focused business model. Federal regulators raised safety and soundness concerns tied to Custodia's concentration in cryptocurrency-related financial services. Custodia pressed forward with its lawsuit, maintaining that federal law does not grant Reserve Banks unlimited discretion to reject qualified applicants.

In March 2024, a federal district court rejected Custodia's position and upheld the Kansas City Fed's decision-making authority. The Tenth Circuit Court of Appeals later affirmed that reasoning, ruling that Reserve Banks do retain discretion over master account approvals. In March 2026, the full appeals court denied Custodia's request for a rehearing by a 7-3 vote, prompting the Supreme Court petition.

Kraken's Limited Access Adds New Dimension

Custodia's legal fight now unfolds against the backdrop of another Wyoming-chartered digital asset institution gaining a foothold in the Federal Reserve system. In March 2026, the Kansas City Fed approved Kraken Financial for a limited-purpose master account, making Kraken the first crypto-native institution to receive direct Federal Reserve payment access.

Kraken's arrangement permits the use of core payment services for dollar settlement but carries notable restrictions. The account excludes interest on reserve balances and does not provide access to Federal Reserve liquidity facilities. As a result, Kraken obtained payment connectivity without several key benefits associated with conventional master accounts.

Separately, the Federal Reserve has proposed a broader framework for restricted payment accounts available to eligible financial institutions. If adopted, the framework could establish an alternative pathway for qualifying fintech and digital asset firms seeking payment system access.

The Kansas City Fed faces a September 11, 2026 deadline to respond to Custodia's Supreme Court petition. Whether the justices agree to hear the case will shape the regulatory landscape for state-chartered digital asset banks across the country.