Tenth Circuit affirms Federal Reserve discretion to deny Custodia a master account

What changed

A divided Tenth Circuit affirmed judgment against crypto-focused Custodia Bank, holding that federal law did not impose a nondiscretionary duty requiring the Kansas City Fed to provide a master account and that the Board’s denial did not supply the relief Custodia sought. The decision leaves regional Reserve Banks substantial gatekeeping discretion over direct payment-system access.

Who it affects

• State-chartered banks seeking Federal Reserve master accounts
• Crypto custodians and banks dependent on payment-system access
• Advisers diligencing banking and settlement partners

What is still open

• Whether Supreme Court review or legislation will alter master-account access standards
• How Reserve Banks will apply risk-based discretion to other novel-charter applicants

What it means for an advisor

• Treat direct Federal Reserve access as a discretionary counterparty dependency, not an entitlement; diligence fallback correspondent banking, liquidity, settlement and concentration risks for digital-asset providers.