The U.S. Court of Appeals for the Tenth Circuit has rejected Custodia Bank's final appeal for a Federal Reserve master account in a 7-3 vote, ending a legal fight that began in 2021. The ruling, handed down on March 13, 2026, affirms that Federal Reserve Banks have discretion to approve or deny master account applications from eligible institutions.
The timing makes this more than a courtroom footnote. Ten days before Custodia lost its appeal, Kraken became the first crypto firm to receive a Fed master account through the Federal Reserve Bank of Kansas City.
Five Years of Litigation, One Paragraph of Finality
Custodia Bank, founded by Wall Street veteran Caitlin Long, applied for a Federal Reserve master account in 2021. A master account gives direct access to the Fed's payment rails, including Fedwire, without relying on intermediary banks. The Fed rejected the application. Custodia sued, arguing the Federal Reserve Act entitled it to an account and that the Fed had no discretion to deny one.
The district court sided with the Fed. The Tenth Circuit panel upheld that decision in late 2025. Custodia then requested an en banc rehearing, asking the full court to reconsider. That request failed 7-3.
Judge Timothy Tymkovich dissented, writing that "holding that the Reserve Banks have unreviewable discretion over master accounts places us on the wrong side of the statutes and, likely, that of the Constitution as well." Two other judges joined his dissent.
Custodia said in a statement posted to X that it was "actively considering" petitioning for a rehearing, noting the dissent was "the next big thing" after not getting a win. A petition to the Supreme Court remains a theoretical option, but the odds of the court taking a case about Fed administrative discretion are slim.
Kraken Got Through the Side Door
While Custodia spent five years in court arguing that the Fed must grant access, Kraken took a different route entirely. Its banking arm, Kraken Financial, operates under a Wyoming Special Purpose Depository Institution charter. On March 4, the Federal Reserve Bank of Kansas City approved a limited master account for Kraken, making it the first crypto company to gain direct access to the Fed's core payment system.
The account comes with restrictions. Kraken cannot earn interest on reserves or access the Fed's emergency lending window. The approval is for an initial term of one year. But it does connect Kraken directly to Fedwire, enabling faster fiat settlement for institutional clients without intermediary banks taking a cut or adding delays.
Federal Reserve Vice Chair for Supervision Michelle Bowman described the Kansas City approval as a "pilot" to test how nonbanks can access the payments system. The implication: this is not a one-off exception. It is a template.
The Fed Is Building a New Lane
The national Federal Reserve board is now developing a "skinny" master account policy that would extend limited access to crypto firms and other nonbank financial institutions nationwide. The framework mirrors what Kansas City did with Kraken: restricted accounts without the full suite of privileges that traditional banks receive.
This is a reversal from the posture the Fed maintained throughout Custodia's litigation. From 2021 through 2025, the Fed's position was essentially that crypto-focused institutions did not qualify for master accounts and that the Fed had sole discretion to decide. Now the same institution is building a policy to invite them in, just through a narrower door.
For crypto firms that need direct payment system access, the practical question has shifted from "will the Fed let us in?" to "which regional Fed bank should we apply to, and under what terms?"
What This Means for Crypto Payment Rails
A Fed master account is the infrastructure layer beneath everything else. Without one, crypto companies that want to move fiat rely on correspondent banking relationships, intermediary banks that can be slow, expensive, and prone to cutting off crypto clients with little notice.
Kraken's direct Fedwire access changes the economics of fiat on-ramps and off-ramps. Deposits and withdrawals that previously routed through intermediary banks can now settle directly. For institutional traders moving large volumes, this reduces both cost and counterparty risk.
If the Fed's skinny master account policy expands to other crypto firms, it could reshape how crypto card issuers handle the fiat side of their operations. Card programs currently depend on banking partners like Cross River Bank, Sutton Bank, or Metropolitan Commercial Bank to process transactions and access payment networks. Direct Fed access, even limited, would reduce that dependency.
The catch: the skinny account model is still in early stages. No timeline has been published for the national policy. And the one-year term on Kraken's account means the pilot could be revoked if problems emerge.
Custodia Won the Argument, Lost the Case
The irony of the Custodia saga is that its core claim, that crypto firms deserve access to the Fed's payment system, has been validated by the Fed itself through Kraken's approval and the skinny account policy. Custodia's legal theory (that the Fed has no discretion to deny applications) lost. But the practical outcome it sought (crypto firms getting master accounts) is happening anyway.
Whether Custodia itself will benefit from the new policy remains uncertain. A person familiar with the bank's efforts confirmed it continues pursuing master account access despite the court loss. The skinny account pathway through a regional Fed bank may be a more viable route than another trip to the Supreme Court.
BTC traded at $70,869 as of March 14, 2026, down 0.3% over 24 hours, with the Fear and Greed index sitting at 30, in "Fear" territory. The market showed no reaction to the ruling, which is itself telling: the fight over whether crypto gets Fed access is no longer a question. The question now is how much access, and on whose terms.
Overview
The Tenth Circuit's 7-3 ruling ends Custodia Bank's five-year legal fight for a Fed master account, but the battle it fought has already been won through other channels. Kraken received a limited master account from the Kansas City Fed on March 4. The national Federal Reserve board is developing a skinny master account policy for crypto firms. The dissent from three judges raises constitutional questions that could surface in future cases. Custodia says it is "actively considering" further action.
