10th Circuit Denies Custodia Rehearing on Fed Account

The United States Court of Appeals for the Tenth Circuit has rejected Custodia Bank's request for a full-court rehearing in its long-running legal challenge against the Federal Reserve, upholding a prior ruling that gives Reserve Banks discretion to deny master accounts to financial institutions. The decision, issued on March 13, came in a 7-3 vote among active judges and marks the latest defeat for the Wyoming-chartered, crypto-focused bank after more than five years of litigation.

Custodia first applied for a master account in October 2020, seeking direct access to the Federal Reserve's payment infrastructure, which includes systems like Fedwire for settling transactions in real time without intermediary banks. Such accounts allow institutions to hold reserves at the central bank and process payments efficiently, a key operational tool for banks. The Federal Reserve Bank of Kansas City denied the application in 2023, citing concerns over Custodia's business model involving digital assets and potential risks to financial stability, including anti-money laundering compliance and cybersecurity.

In its lawsuit, filed in 2022, Custodia argued that the Monetary Control Act of 1980...