Crypto Group Supports Custodia in Supreme Court Fight for Fed Access

A U.S. crypto industry group is urging the Supreme Court to take up a dispute between Custodia Bank and the Federal Reserve over access to the central bank’s payment system, arguing that federal law limits how broadly the Fed can refuse eligible banks.

In an amicus brief filed Wednesday, the Blockchain Association said the Fed should not have wide discretion to deny payment services to state-chartered banks that meet eligibility requirements. The group also framed Custodia’s case as part of a broader pattern of resistance to crypto banking—referencing regulatory pressure it links to the “Operation Choke Point 2.0” narrative.

Key takeaways

• The Blockchain Association filed an amicus brief supporting Custodia Bank’s petition to the U.S. Supreme Court over Fed master account access.
• The group argues the Federal Reserve should not be able to effectively override eligibility for payment services through broad discretion.
• Custodia’s application for a master account was rejected by the Federal Reserve Bank of Kansas City, and a Tenth Circuit ruling left the Supreme Court as the last option.
• The dispute is unfolding as some crypto firms have obtained federal banking structures and, in limited cases, direct access to Fedwire.

Why Custodia is looking to the Supreme Court

Custodia Bank, a Wyoming-chartered institution focused on digital assets, applied for a Federal Reserve master account in 2020. Such an account is designed to give qualifying banks direct access to payment system services, reducing reliance on intermediary institutions for transfers.

The Federal Reserve Bank of Kansas City denied Custodia’s request in 2023. After that denial, the case moved to the Tenth Circuit Court of Appeals, which ultimately ruled that the regional Fed bank had discretion to reject the application.

Earlier this year, the Tenth Circuit voted 7-3 against rehearing the dispute in March. With the appeals court effectively closing the door, Custodia’s petition to the Supreme Court became its remaining path for review.

The Blockchain Association’s legal argument

The Blockchain Association’s amicus brief argues that the lower court gave the Fed too much leeway in how it interprets its authority. The group contends that federal law requires the Federal Reserve to make its payment services available to eligible nonmember banks.

In the association’s view, the Tenth Circuit’s reasoning risks granting the Fed a de facto veto over state-chartered banks by allowing the central bank to withhold the operational access these institutions would need to function independently.

The filing also connects Custodia’s situation to claims about regulatory discouragement of crypto-related banking activity. Specifically, it links the case to concerns raised under the “Operation Choke Point 2.0” theme, which has been used in parts of the industry to describe alleged pressure that makes it harder for banks to serve digital asset clients.

Notably, the brief’s central emphasis is legal and structural: whether the Fed’s discretion in granting access should be narrowly constrained when a bank meets eligibility requirements.

Access to Fed payment rails is becoming more common—though unevenly

Custodia’s dispute comes at a time when some crypto businesses are making headway into the U.S. banking system through federal licensing, and in certain circumstances, direct links to Federal Reserve infrastructure.

For example, in March, Kraken Financial—an entity tied to the Kraken ecosystem—became the first crypto banking unit to receive a limited-purpose master account from the Federal Reserve Bank of Kansas City. That approval provided direct access to Fedwire. The development stood in contrast to Custodia’s earlier rejection by the same regional Fed bank, highlighting that the legal questions at the heart of Custodia’s case remain highly consequential for other banks pursuing similar access.

Meanwhile, Coinbase has moved through federal chartering pathways tied to custody and trust activities. In April, the company received conditional approval from the Office of the Comptroller of the Currency (OCC) to establish a national trust company, a structure that would bring custody services under federal oversight without allowing retail deposits or operation as a commercial bank. Circle later obtained final OCC approval for a national trust bank in July, and Kraken parent Payward applied for its own national trust company charter the following month.

The OCC has also conditionally approved national trust bank applications for several other crypto-adjacent firms, including Ripple, BitGo, Fidelity Digital Assets, and Paxos in December.

Industry pushback from traditional banking groups

As crypto firms seek federal charters and deeper banking integration, traditional banking associations have argued that these entities can gain benefits associated with bank status without accepting the full set of regulatory obligations applied to conventional retail banks.

In April, the Independent Community Bankers of America opposed Coinbase’s conditional OCC approval for a national trust company, arguing that crypto companies are pursuing the advantages of bank charters while avoiding certain burdens of the traditional banking framework.

This tension underscores a broader theme: even as regulators have created pathways for crypto-related institutions to operate under federal supervision, access to the most central components of the payment system—such as Fed master accounts—still appears to be a contested boundary.

For investors and operators, the Supreme Court decision will matter less as a symbolic victory and more as a potential clarification of how far the Fed can go when determining payment-system access for eligible banks. Until the Court acts, it remains uncertain whether Custodia’s case will reshape the Fed’s discretion or further cement the limits of judicial review over payment rail eligibility decisions.