What happened?
A federal appeals court ruled that the Federal Reserve can refuse Custodia a master account. The Tenth Circuit said the Fed has discretion to deny access even if a bank meets eligibility criteria, with Judge David Ebel saying that power is needed to safeguard the financial system. The decision keeps Custodia and other crypto-focused banks from direct access to Fed payment services.
Who does this affect?
This mainly affects Custodia and other crypto-focused banks operating under special state charters that want direct Fed payment access. It also matters to stablecoin issuers, fintechs, and any firms that hoped to use master accounts for faster settlement and wire transfers. Customers, partners, and investors in those firms may face continued friction, higher costs, or limited service options as a result.
Why does this matter?
Keeping crypto banks out of Fed payment rails raises operational costs and counterparty risk because they must rely on correspondent banks or other workarounds. That could slow product rollouts, reduce liquidity in crypto markets, and make U.S.-based crypto firms less competitive compared with firms in friendlier jurisdictions. Still, the Fed’s proposal for limited “skinny” master accounts suggests a possible policy shift that could change market dynamics if it’s adopted.