Custodia Bank Challenges Federal Reserve in Landmark Crypto Banking Case

Custodia Bank, a Wyoming-chartered institution specializing in digital assets, has escalated its legal battle with the Federal Reserve to the Tenth Circuit Court of Appeals. The dispute centers on the Fed's refusal to grant a master account—a critical lifeline for accessing Core payment systems like ACH and wire transfers. Without it, Custodia argues, its state-approved charter is effectively neutered.

The case underscores a broader clash between state innovation and federal oversight. Wyoming's 2020 SPDI framework—designed to attract crypto firms with strict reserve requirements—now faces a litmus test. Custodia contends the Fed's rejection oversteps legal boundaries, while regulators assert control over financial system access.

This high-stakes standoff could redefine how crypto-native banks operate in the U.S., with implications for institutional adoption and market liquidity. The outcome may Ripple across exchanges like Kraken and Coinbase, which rely on banking partnerships for fiat ramps.