Court Upholds Federal Reserve’s Authority to Deny Master Accounts to Crypto Banks

A U.S. appellate court has delivered a significant blow to crypto-focused financial institutions, ruling that the Federal Reserve retains discretionary power to deny master account access. The Tenth Circuit's 2-1 decision against Custodia Bank establishes precedent, affirming that mere eligibility doesn't guarantee payment system access for digital asset firms.

The judgment interprets Section 342 of the Federal Reserve Act as granting broad authority over deposit approvals, countering arguments based on the Monetary Control Act. This legal setback for Custodia reflects growing institutional resistance to crypto integration within traditional banking frameworks.

Market implications remain uncertain, but the ruling potentially constrains crypto-native banks from accessing critical financial infrastructure. Custodia's planned appeals suggest this regulatory battle may evolve into a prolonged test case for digital asset banking access.