In brief
- Custodia Bank is asking a federal appeals court to rehear its loss against the Federal Reserve using a rare en banc review.
- The bank argues the Fed’s refusal to grant it a master account raises constitutional and states’-rights issues.
- Judges previously upheld the Fed’s discretion to deny master accounts.
After losing a key court battle in its bid to force the Federal Reserve to grant it a coveted master account, crypto bank Custodia is now urging a federal appeals court to revisit the ruling—via an extraordinary, rarely granted procedure.
Custodia has asked the U.S. Court of Appeals for the 10th Circuit, based in Denver, to rehear its case “en banc”—meaning all 19 judges on the court would review the case, as opposed to the panel of three judges that ruled 2-1 against Custodia in October.
A rehearing en banc is an “extraordinary procedure” only granted in cases of exceptional public importance, or when a ruling directly contradicts another ruling by the same circuit or the Supreme Court. Statistically, the odds of receiving such a rehearing are extremely low.
Custodia maintains, though, that such a revision is required in its case. In a Monday filing, the bank argued its predicament is a matter of national importance, which erodes states’ rights when it comes to control over banking, and poses constitutional questions about the authority granted to the mid-level Fed officials who denied Custodia’s application for a master account.
Master accounts, possessed by all federally chartered banks, allow such institutions to directly access the Fed’s payment services, and thus move money across the country. They are needed to operate a bank nationally, and thus are extremely valuable.
For years, Custodia has tried—and failed—to secure such an account from the Fed. The crypto bank currently operates under a special purpose depository institution (SPDI) charter granted by the state of Wyoming.
To date, and even as it has become more crypto-friendly under the second Trump administration, the Fed has yet to grant any crypto-focused bank a master account.
Custodia told the court Monday that the act of denying a bank a master account “all but sentences the bank to death.”
In October, two 10th circuit judges—one Republican-appointed, and one Democrat—upheld a 2024 ruling affirming the Fed’s discretion to reject master account applications from institutions it determines could pose a threat to the stability of the American banking system.
“We reject Custodia’s attempt to impair the Fed’s ability to safeguard our nation’s financial system through the exercise of discretion to reject master account access,” Judge David Ebel wrote. He was appointed to the court in 1988 by former president Ronald Reagan.
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