“We conclude the plain language of the relevant statutes grants Federal Reserve Banks discretion to reject master account access requests from eligible entities,” Judge David Ebel wrote for the 2-1 majority.
The court said accepting Custodia’s position would impair the Fed’s ability to protect the financial system.
The Blockchain Association is now asking the Supreme Court to embrace the reasoning of dissenting Judge Timothy Tymkovich, who said federal law provides that Fed payment services “shall” be available to eligible nonmember depository institutions. The association contended that language imposes a command on the Fed rather than leaving access entirely to its discretion.
However, the brief framed the case as involving more than statutory interpretation. The association said allowing the Fed to deny payment-system access to state-chartered banks undermines the traditional dual banking system by enabling federal regulators to effectively override decisions by state banking authorities.
“Whether federal regulators, based on their own discretionary whims, can intrude on state prerogatives and debank lawful businesses is a question of exceptional importance with broad consequences for the national economy,” the brief said.
The association also placed Custodia’s experience within what the crypto industry has labeled “Operation Choke Point 2.0,” alleging that federal banking agencies under the previous administration used supervisory pressure to discourage regulated banks from serving digital asset businesses. It said the Custodia ruling could extend similar leverage to state-chartered institutions by making access to the Fed’s payment infrastructure discretionary.
That argument gives the case potentially broader implications beyond crypto. According to the association, the 10th Circuit’s approach “provides a blueprint for federal regulators to debank disfavored industries or companies in the future without interference from state regulators.”
The regulatory backdrop has shifted since the 10th Circuit ruling. Fed officials were already considering specialized “skinny” master accounts that could provide more limited payment system access to crypto and other innovation-focused institutions.
The Blockchain Association said such policy changes do not resolve the underlying legal issue of whether access ultimately remains subject to the Fed’s discretion. The Supreme Court has not agreed to hear Custodia’s case. If it does, the dispute could determine not only the future of crypto banks’ access to Fed infrastructure, but the balance of power between state banking charters and federal control over the nation’s payment rails.
