NDBA - North Dakota Bankers Association
11/05/2025 | Press release | Distributed by Public on 11/05/2025 09:03
Appeals Court Upholds Fed Decision to Deny Crypto Firm Master Account
A federal appeals court has ruled that the Federal Reserve is not obligated to grant a master account to a cryptocurrency firm, as the move would "impair the Fed's ability to safeguard our nation's financial system."
In 2020, the Wyoming-based Custodia Bank requested master account access from the Kansas City Bank. It was rejected after officials determined the firm's crypto-focused business model introduced undue risk into the Fed's payment systems and services. Custodia sued in the U.S. District Court for Wyoming, which ultimately ruled in favor of the Fed. The firm then appealed the decision to the Tenth Circuit Court of Appeals.
In a 2-1 decision, the justices upheld the lower court decision. "The Fed's historical practices demonstrate that it has always understood that it had the authority to protect its payment systems from risk," the majority concluded. "The view advanced by Custodia creates a danger of Reserve Banks having no discretion with respect to master account access, thereby impairing the Reserve Bank's ability to carry out their duty to safeguard our financial system from risky institutions."
Writing in the minority, Judge Timothy Tymkovich argued that the Fed has managed risky banks with master accounts for years. "Indeed, recent history has amply demonstrated that traditional banks can be no less risky than innovative banks," he said. "The Fed's policy concerns can be handled through policy innovation rather than shutting the door to innovative banks and insulating itself from judicial review."
The split decision means Custodia could appeal to have the full Tenth Circuit review the case.
A federal appeals court has ruled that the Federal Reserve is not obligated to grant a master account to a cryptocurrency firm, as the move would "impair the Fed's ability to safeguard our nation's financial system."
In 2020, the Wyoming-based Custodia Bank requested master account access from the Kansas City Bank. It was rejected after officials determined the firm's crypto-focused business model introduced undue risk into the Fed's payment systems and services. Custodia sued in the U.S. District Court for Wyoming, which ultimately ruled in favor of the Fed. The firm then appealed the decision to the Tenth Circuit Court of Appeals.
In a 2-1 decision, the justices upheld the lower court decision. "The Fed's historical practices demonstrate that it has always understood that it had the authority to protect its payment systems from risk," the majority concluded. "The view advanced by Custodia creates a danger of Reserve Banks having no discretion with respect to master account access, thereby impairing the Reserve Bank's ability to carry out their duty to safeguard our financial system from risky institutions."
Writing in the minority, Judge Timothy Tymkovich argued that the Fed has managed risky banks with master accounts for years. "Indeed, recent history has amply demonstrated that traditional banks can be no less risky than innovative banks," he said. "The Fed's policy concerns can be handled through policy innovation rather than shutting the door to innovative banks and insulating itself from judicial review."
The split decision means Custodia could appeal to have the full Tenth Circuit review the case.
In 2020, the Wyoming-based Custodia Bank requested master account access from the Kansas City Bank. It was rejected after officials determined the firm's crypto-focused business model introduced undue risk into the Fed's payment systems and services. Custodia sued in the U.S. District Court for Wyoming, which ultimately ruled in favor of the Fed. The firm then appealed the decision to the Tenth Circuit Court of Appeals.
In a 2-1 decision, the justices upheld the lower court decision. "The Fed's historical practices demonstrate that it has always understood that it had the authority to protect its payment systems from risk," the majority concluded. "The view advanced by Custodia creates a danger of Reserve Banks having no discretion with respect to master account access, thereby impairing the Reserve Bank's ability to carry out their duty to safeguard our financial system from risky institutions."
Writing in the minority, Judge Timothy Tymkovich argued that the Fed has managed risky banks with master accounts for years. "Indeed, recent history has amply demonstrated that traditional banks can be no less risky than innovative banks," he said. "The Fed's policy concerns can be handled through policy innovation rather than shutting the door to innovative banks and insulating itself from judicial review."
The split decision means Custodia could appeal to have the full Tenth Circuit review the case.
A federal appeals court has ruled that the Federal Reserve is not obligated to grant a master account to a cryptocurrency firm, as the move would "impair the Fed's ability to safeguard our nation's financial system."
In 2020, the Wyoming-based Custodia Bank requested master account access from the Kansas City Bank. It was rejected after officials determined the firm's crypto-focused business model introduced undue risk into the Fed's payment systems and services. Custodia sued in the U.S. District Court for Wyoming, which ultimately ruled in favor of the Fed. The firm then appealed the decision to the Tenth Circuit Court of Appeals.
In a 2-1 decision, the justices upheld the lower court decision. "The Fed's historical practices demonstrate that it has always understood that it had the authority to protect its payment systems from risk," the majority concluded. "The view advanced by Custodia creates a danger of Reserve Banks having no discretion with respect to master account access, thereby impairing the Reserve Bank's ability to carry out their duty to safeguard our financial system from risky institutions."
Writing in the minority, Judge Timothy Tymkovich argued that the Fed has managed risky banks with master accounts for years. "Indeed, recent history has amply demonstrated that traditional banks can be no less risky than innovative banks," he said. "The Fed's policy concerns can be handled through policy innovation rather than shutting the door to innovative banks and insulating itself from judicial review."
The split decision means Custodia could appeal to have the full Tenth Circuit review the case.
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