Custodia Bank Loses Final Court Appeal Over Federal Reserve Master Account

Core Viewpoint - The US federal appeals court has rejected Custodia Bank's final appeal against the Federal Reserve's authority over granting master accounts, concluding a five-year legal battle for direct access to the central bank's payment infrastructure [1][3]. Group 1: Legal Proceedings - The US Court of Appeals for the Tenth Circuit voted 7–3 not to hear Custodia's final appeal, effectively closing the case and affirming the Federal Reserve's discretion in granting access to its banking services [3]. - Custodia Bank initially applied for a Federal Reserve master account in October 2020, which would allow it to hold reserves directly at the central bank and connect to its payment systems [4]. - After its application was denied, Custodia argued in court that the Monetary Control Act mandates the Fed to provide services to state-chartered banks, claiming entitlement to a master account [5]. Group 2: Court Decisions and Implications - Courts consistently sided with the Federal Reserve, emphasizing that the central bank retains discretion over the granting of master accounts [6][8]. - The ruling comes shortly after crypto exchange Kraken obtained a limited master account from the Federal Reserve Bank of Kansas City, allowing it to connect to the Fedwire payments network, albeit with restricted services compared to traditional banks [6][8]. - The case highlights a growing trend of fintech and crypto firms seeking US bank charters and direct access to the banking system [8]. Group 3: Dissenting Opinions - Despite the ruling against Custodia, Judge Timothy Tymkovich expressed a strong dissent, stating that access to a master account is "indispensable" for banks and that denial of such access is "akin to a death sentence" [8].