Custodia Bank Loses Case For Rehearing Over Fed Master Account - Details | Bitcoinist.com

Trusted Editorial content, reviewed by leading industry experts and seasoned editors. Ad Disclosure Crypto bank Custodia has lost another legal battle in its campaign to review the Federal Reserve’s position as the final authority over granting master accounts. This development comes after the US Court of Appeals for the Tenth Circuit rejected the Caitlin Long-led digital bank’s request for rehearing after an initial favorable ruling for the Federal Reserve in October 2025.

Related Reading: Binance Is Suing The Wall Street Journal — And Now Congress Wants Answers Too## Custodia Loses 6-Year Legal Battle With FRBKC

In 2023, the Federal Reserve Bank of Kansas City (FRBKC) rejected Custodia’s application for a master account, a designation that would have granted the crypto bank access to the Fed’s payment rails, thus eliminating the need for intermediary services Notably, Custodia challenged this decision at a Wyoming district court in 2024, claiming its eligibility for a master account as a nonmember depository institution, while also stating the FRBKC lacked the constitutional authority to deny its application, having satisfied the requirements

Following an initial defeat at this state court, Custodia moved its case to the US Court of Appeals for the Tenth Circuit, where a three-man panel also sided with the Federal Reserve, reinforcing the central banks as the final authority to grant a master account regardless of the candidate’s eligibility In December 2025, the crypto bank filed for a petition for an en banc hearing that would include a full ten-member panel. However, a report by independent editor Eleanor Terrett states the appellate court has chosen to uphold the initial ruling in favor of the FRBKC.

Further details indicate that the judgment was reached by a 7-3 vote, with the majority of the panel agreeing that the Federal Reserve holds final authority over such account-designation matters Notably, dissenting judges Timothy Tymkovich and Allison Eid warned that granting Federal Reserve banks unchecked authority to accept or deny applications from state-chartered institutions contravened the Monetary Control Act of 1980.

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In terms of its next actions, Custodia is within its rights to take the case to the US Supreme Court. However, the odds of the nation’s apex court granting such reviews are low. Alternatively, the crypto bank can seek to apply for the special limited master account recently granted by the FRBKC to crypto exchange Kraken. Although this differs from standard master accounts, they both have similar features that could ease operations for Custodia

At the time of writing, Custodia has yet to issue any official reaction to the Appellate Court’s recent ruling

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