Tenth Circuit Upholds Fed Denial of Custodia Account

A U.S. Court of Appeals for the Tenth Circuit panel upheld a lower-court ruling that the Federal Reserve may deny Custodia Bank a Fed master account, which grants direct access to the U.S. payment system. The 2–1 decision was written by Judge David Ebel, with a dissent from Judge Timothy Tymkovich, and rejected Custodia’s claim that eligibility creates an entitlement. The Fed’s Kansas City branch rejected Custodia’s 2020 application after roughly a 19‑month review, citing safety-and-soundness concerns tied to the bank’s crypto-focused business model, limited traditional risk-management experience, and the volatility of digital assets. Custodia, a Wyoming-chartered SPDI founded by Caitlin Long and rebranded from Avanti, sued in 2022 alleging unlawful delay and is actively considering a rehearing or further appeal. The ruling keeps crypto-focused banks effectively locked out of direct Fed payment rails for now and underscores broader regulatory tensions over integrating digital-asset firms with the U.S. central banking system.