Tenth Circuit upheld Reserve Bank discretion to deny Custodia a master account

The U.S. Court of Appeals for the Tenth Circuit on October 31, 2025 affirmed that the Federal Reserve Bank of Kansas City could deny Custodia Bank a master account even though the Wyoming-chartered institution was statutorily eligible to apply. The 2–1 published decision preserved Reserve Banks’ discretion over direct access to Federal Reserve accounts and payment services, rejecting Custodia’s argument that eligibility created an automatic right to an account.

The ruling mattered beyond one applicant. Custodia was designed to connect institutional digital-asset activity with U.S. dollar banking under Wyoming’s Special Purpose Depository Institution charter. A decision compelling access could have strengthened the position of state-chartered, uninsured crypto-focused banks seeking direct entry to central-bank payment infrastructure. The court instead held that a qualifying charter opens the review process, not the account itself.

What the court decided

A master account records a depository institution’s balances and transactions with a regional Reserve Bank. It is the account through which an institution directly uses Federal Reserve services. The opinion noted that an institution without one can still reach Fed payment systems through a correspondent bank or use competing private services; denial therefore blocks direct access, not every possible payment route.

Custodia applied to the Kansas City Fed in October 2020. The opinion says the Reserve Bank confirmed Custodia’s legal eligibility in January 2021. In August 2021, Custodia separately sought Federal Reserve membership, which would have brought federal supervision. The Board of Governors issued its tiered account-access guidelines in August 2022, placing institutions that were neither federally insured nor supervised by a federal banking agency in the category receiving the strictest review. Custodia fell in that tier.

In January 2023, the Kansas City Fed denied the master-account request, citing heightened risks associated with Custodia’s crypto-focused business model and the absence of federal banking supervision. The Board denied Custodia’s membership application on the same date. After the federal district court in Wyoming ruled for the Fed defendants in March 2024, Custodia appealed.

The Tenth Circuit majority read three statutes together. It concluded that Section 342 of the Federal Reserve Act uses discretionary language when authorizing Reserve Banks to receive deposits. It rejected Custodia’s reading of the Monetary Control Act’s requirement that services be available to nonmember depository institutions as a command to open an account for every eligible applicant. The majority also reasoned that Congress’s later requirement to disclose whether applications were approved, rejected, pending or withdrawn contemplated rejection as a possible result.

The court separately agreed that the Board’s involvement in the review did not amount to final agency action against Custodia: the Kansas City Fed made the account decision. It also rejected Custodia’s due-process theory and treated its Appointments Clause argument as waived.

A split over access and accountability

Judge Timothy Tymkovich dissented. He read the Monetary Control Act as mandating access for eligible nonmember institutions and warned that the majority’s interpretation left significant authority with Reserve Bank officials while limiting judicial review. That disagreement showed that the case was not simply a technical loss for one crypto bank; it exposed a deeper dispute over who controls entry to public payment infrastructure.

The verified effect on October 31 was nevertheless narrow. The ruling did not declare cryptocurrency illegal, prohibit Wyoming’s SPDI charter, revoke Custodia’s state charter or establish that every crypto-oriented bank must be denied. It held that statutory eligibility did not automatically entitle Custodia to a master account and affirmed judgment on the claims before the panel.

What remained unresolved on October 31

The decision did not measure costs imposed by correspondent banking, quantify demand from other novel-charter institutions or establish how consistently the twelve Reserve Banks would apply the federal guidelines. It also did not resolve any further review Custodia might seek. Those questions required later court records, applicant disclosures and payment-access data; none can be inferred from the October 31 opinion alone.

For the digital-asset industry, the immediate institutional signal was clear: a state banking charter and statutory eligibility were not, by themselves, a guaranteed bridge into the Federal Reserve’s payment system.