Custodia Bank, a crypto‐focused bank founded by Bitcoin advocate Caitlin Long, is doubling down on efforts to obtain a master account at the US Federal Reserve by filing a new petition in the United States Court of Appeals for the Tenth Circuit.
On Monday, the Wyoming-chartered company filed a petition asking all active judges of the Tenth Circuit to reconsider its October decision upholding the Federal Reserve’s denial of a master account for Custodia.
Through the petition, formally termed a “rehearing en banc,” Custodia argued that the panel had misread the Monetary Control Act, which it asserts entitles any eligible bank to a master account, and in doing so, undermines state banking authority.
“When the Fed denies a master account to a state-chartered financial institution, it effectively vetoes a bank charter that state regulators have approved,” the petition noted, adding that the issue raises “serious constitutional questions” about the Fed’s structure.
Why is a Fed master account so important?
Issued by the Fed, a master account is a key account that allows a financial institution to hold balances directly with the US central bank and access its core payment systems.
For companies like Custodia, having a master account is crucial, as it enables them to settle payments and clear transactions directly in central bank money, rather than relying on another bank as an intermediary. Without it, they must use correspondent banks to access the Fed’s systems, which can add cost, risk and delay.
“In terms of tiers, a master account is Diamond, bank is Platinum, trust companies are Gold and money transmitter licenses are Silver,” Custodia Bank founder and CEO Long said in an X post in July, adding that Custodia and Kraken are the “only two crypto companies” that are banks.
Custodia has been trying to get a Fed master account since it launched in 2020, but the Kansas City Fed denied its master account application in January 2023, and the Federal Reserve also rejected its bid to become a member of the Federal Reserve System.
Related: Crypto among sectors ‘debanked’ by 9 major banks: US regulator
Custodia’s long fight for a Fed master account highlights ongoing crypto debanking issues, even though the Trump administration had expressed support for crypto.
In March, Long said the US government has done “nothing” to address crypto debanking issues since President Donald Trump returned to office, highlighting one of the crypto industry’s biggest unresolved challenges.
