What happened?
A U.S. appeals court ruled against Custodia Bank and upheld the Federal Reserve’s decision to deny the bank a master account. The Tenth Circuit affirmed a lower court finding that the Fed acted within its authority after Custodia’s five-year effort to gain direct access to Fed payment systems. The decision leaves the Fed’s discretion intact and rejects Custodia’s claims of unlawful delay or unfair treatment.
Who does this affect?
This hits Custodia Bank and its customers, including users of its Avit stablecoin and crypto banking services, who won’t get the benefits of direct Fed access. It also sends a warning to other crypto-native banks and startups seeking master accounts that the regulatory bar remains high. Meanwhile, traditional banks and intermediaries that handle fiat for crypto firms stand to keep their role as necessary middlemen.
Why does this matter?
The ruling keeps crypto banks off core Fed rails, which limits efficiency and forces them to rely on intermediaries, slowing product rollout and raising costs. From a market perspective, investors may favor established banks and custodians over crypto-native firms, potentially cooling enthusiasm for bank-issued stablecoins and crypto banking ventures. Overall, this increases regulatory uncertainty for digital-asset companies and could shift capital back toward more regulated financial players, affecting valuations across crypto and fintech.