Key Points
- •The US Court of Appeals for the Tenth Circuit has supported the Federal Reserve in its denial of Custodia Bank's request for a master account.
- •The ruling reinforces the Federal Reserve's regulatory discretion over digital asset institutions and their access to payment systems.
- •This decision significantly impacts Custodia Bank's business model and its ability to offer stablecoin projects and crypto custody solutions.
The US Tenth Circuit Court of Appeals ruled in favor of the Federal Reserve on October 31, 2025, denying Custodia Bank's request for a master account.
The ruling supports the Fed's regulatory control over digital asset institutions, potentially restricting their integration into the financial system.
The US Tenth Circuit Court of Appeals ruled in favor of the Federal Reserve, denying Custodia Bank’s request for a master account. The judgement emphasizes the Fed's right to restrict access to payment systems due to digital asset risks.
Background of the Case
Custodia Bank, founded by crypto advocate Caitlin Long, faced rejection from the Federal Reserve and the Kansas City Bank. The Court's decision, led by Judge David Ebel, focused on concerns over Custodia's crypto activities introducing systemic risks into the financial system.
Impact on Custodia Bank and Crypto Banking
The rejection directly affects Custodia’s model, impacting their efforts to implement stablecoin projects and crypto custody solutions. Caitlin Long expressed disappointment yet recognized a strong dissent as a promising element in future challenges.
The ruling draws attention to financial and market dynamics, questioning the balance between regulatory caution and innovation in crypto banking. Critics argue the stance might deter crypto-focused banks from pursuing new financial avenues within regulated environments.
Broader Implications for Crypto Institutions
The decision supports broad Federal Reserve discretion, potentially influencing future policies around crypto banking. Long-term effects on market confidence in crypto institutions seeking integration with national payment infrastructure remain under scrutiny.
With historical regulatory trends showing reluctance towards crypto banks, Custodia's denial aligns with previous rejections of similar institutions like Kraken Financial. The outcome raises concerns about the potential slowdown of innovation in crypto-related financial services.
Caitlin Long's Reaction
"While we were hoping for a win at the 10th Circuit today, we received the next best thing — a strong dissent." — Caitlin Long, Founder & CEO, Custodia Bank