Appeals court rules Custodia is not entitled to a Fed master account, affirming earlier decision by Wyoming district court.
The U.S. Court of Appeals for the Tenth Circuit has ruled that Custodia is not entitled to a Federal Reserve master account. This decision affirms a 2023 ruling from the U.S. District Court for the District of Wyoming, ending Custodia’s ongoing legal effort to gain direct access to the Fed’s payment systems.
Court Confirms Fed’s Discretion Over Master Account Access
In the court filing issued Friday, the Tenth Circuit stated that Custodia is not “automatically entitled to a master account.” The court affirmed the lower court’s judgment, siding fully with the Federal Reserve on the matter.
BREAKING: The 10th Circuit Court of Appeals has ruled in the @custodiabank v. @federalreserve case.
In a 2–1 decision, the court sided with the Fed, rejecting Custodia’s bid to compel the central bank to grant it a master account.
Story developing. More to come. pic.twitter.com/CZtbHNLrEr
— Eleanor Terrett (@EleanorTerrett) October 31, 2025
Judge Scott Skavdahl had previously ruled that the Federal Reserve has full discretion to approve or deny master account applications. This means the Fed is not required to grant access, even if the applicant meets technical requirements.
Custodia’s legal battle began after its application for a master account was delayed. The bank then sued the Federal Reserve Board of Governors and the Kansas City Fed in 2022, claiming prolonged inaction.
Custodia’s Application and Legal Efforts Since 2020
Custodia, a Wyoming-based special purpose depository institution (SPDI), applied for a master account with the Kansas City Fed in 2020. By 2021, the Federal Reserve Board stepped in and took over the decision-making process.
The bank argued that the delay was unjustified and challenged the Fed’s authority in court. However, both district and appellate courts have now confirmed that access to a master account is not guaranteed by law.
Court Denies Crypto Bank Custodia’s Bid to Pry Master Account From Unwilling Fed
Custodia said it may request a rehearing on the matter, after a panel of judges ruled 2-1 to affirm a district court’s prior ruling denying …
Read more: https://t.co/rpVY1R7Q40 pic.twitter.com/rDdx4a0VJC— Mars Signals (@MarsSignals) October 31, 2025
Custodia’s structure as an SPDI requires it to hold 100% reserves and prohibits it from lending customer fiat deposits. This model differs from traditional banks, which operate on a fractional reserve system.
Fed Governor Mentions Future Options for Payment Innovators
Earlier this month, Federal Reserve Governor Christopher Waller referenced the possibility of a “skinny master account” during a public statement. He said such a model might suit entities focused on payment innovation, although no details have been formalized.
While Waller did not name Custodia, the concept of a limited-access account has drawn interest from firms in the digital asset sector. These accounts would provide access to the Fed’s payment system without the broader privileges of a full banking license.
Custodia has not issued a comment regarding the appeals court decision at the time of writing. The ruling adds clarity to the Federal Reserve’s authority in deciding which institutions gain direct access to central banking infrastructure.
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