The Tenth Circuit Court of Appeals confirmed that the Federal Reserve may deny direct access to a master account and rejected Custodia Bank’s request, a crypto-focused entity. The decision matters because it reaffirms the regulator’s discretion over who connects directly to clearinghouses and affects crypto banks, stablecoin issuers and product and compliance teams seeking to reduce dependence on intermediaries.
The court held that there is no “statutory right” to a master account, validating that the Fed may evaluate business models and risks inherent to the applicant, especially those associated with cryptocurrencies, according to the Tenth Circuit’s ruling.
Custodia Bank, backed by Caitlin Long, filed a lawsuit that culminated in this ruling asserting the regulator’s broad authority, and is known for its collaboration with Vantage Bank to issue a bank-issued stablecoin on Ethereum. The court emphasized that access to critical payments infrastructure is a privilege subject to assessment of financial stability and risk management.
A master account is the direct connection of a financial entity to the Federal Reserve to settle payments and hold reserves in the Fed’s system. The decision reinforces the Fed’s position as arbiter of access to clearinghouses.
Although some regulator officials have proposed limited alternatives —such as “skinny master accounts”— the ruling consolidates the framework in which contracting direct access can be denied for prudential reasons. The decision prioritizes stability and control over direct crypto integration.
Implications for Custodia Bank
Practical effects arising solely from the ruling and its legal framework focus on access, compliance, liquidity, and regulatory posture.
Crypto firms seeking direct reserves at the Fed will find it harder to obtain master accounts; that may maintain dependence on intermediary banks for custody and reserves. KYC/AML and risk management teams must prepare more robust defenses against prudential scrutiny of crypto-native models.
The inability to hold direct reserves with the Fed reduces the security argument that some stablecoin issuers claim to attract institutional counterparties. The ruling creates legal precedents that strengthen the regulator’s discretion against similar requests.
The Tenth Circuit’s resolution highlights the debate over intermediate avenues like the “skinny master accounts” and the crypto industry’s strategy to gain access to payment infrastructures; the next focus will be how regulators and banks revise evaluation criteria and what operational and regulatory responses affected actors will propose.
