Core Viewpoint - The Federal Reserve has retracted its 2023 policy statement that restricted banks from engaging in crypto activities, coinciding with Custodia Bank's ongoing legal battle for a master account [1][3]. Group 1: Regulatory Changes - The policy shift by the Federal Reserve aims to facilitate responsible innovation in the banking sector while ensuring safety standards are upheld [2]. - The previous guidance limited state member banks to activities allowed under other federal banking regulations, but advancements in financial systems and regulatory understanding have made these restrictions outdated [2]. Group 2: Custodia Bank's Legal Challenges - Custodia Bank has escalated its legal fight by filing a petition with the Tenth Circuit Court of Appeals, seeking an en banc review of the Fed's denial of its master account [3]. - The bank contends that the Fed's decision violates the Monetary Control Act, which mandates that payment services "shall be available" to eligible depository institutions, thus creating unconstitutional veto power over state banking charters [3][4]. Group 3: Implications of Master Account Denial - Without access to a master account, Custodia is unable to utilize Federal Reserve wire transfers or automated clearinghouse systems, despite fulfilling all statutory requirements under Wyoming's Special Purpose Depository Institution framework [4]. - The petition raises concerns about federalism, as federal regulators appear to be overriding Wyoming's 2020 charter decision aimed at attracting digital asset companies under strict safety measures [4]. Group 4: Judicial Opinions - A dissenting opinion from Judge Timothy Tymkovich raised constitutional questions regarding the discretion granted to regional Reserve Bank presidents, who are selected by private bank directors rather than being federally appointed [5]. - The dissent resulted in a 2-2 split among circuit judges regarding whether the Monetary Control Act mandates access to master accounts, with Tymkovich arguing that the Fed's interpretation grants unreviewable discretion contrary to the statute's clear language [6].

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 ba ...