Crypto Bank Custodia Files Petition for a Rehearing by All Appellate Judges

Why It Matters

A ruling could reshape how state‑chartered crypto banks obtain core payment services, setting precedent for federal‑state regulatory balance.

Key Takeaways

• Custodia seeks full Tenth Circuit rehearing.
• Argues Fed has unreviewable discretion over master accounts.
• Claims ruling violates state banking authority.
• Cites Monetary Control Act’s mandatory service provision.
• Outcome may set precedent for crypto‑bank payment access.

Pulse Analysis

The dispute between Custodia Bank and the Federal Reserve has become a litmus test for how emerging crypto‑focused institutions can tap the United States’ core payment infrastructure. Since filing its initial lawsuit in 2022, Custodia has pressed the Fed for a master account that would allow it to process ACH and wire transfers on the same footing as traditional banks. In October, a three‑judge panel of the Tenth Circuit upheld the Fed’s refusal, citing discretionary authority over service eligibility. Now, Custodia has filed a petition for an en banc rehearing, asking all active appellate judges to revisit that decision.

Custodia’s petition hinges on two intertwined legal theories. First, it contends that the panel granted the Fed ‘unreviewable discretion,’ a power that conflicts with Article II constitutional limits because Federal Reserve officials are not appointed as United States officers. Second, the bank argues the panel misread the Monetary Control Act, which expressly states that Federal Reserve services ‘shall be available’ to eligible depository institutions, implying a mandatory rather than optional provision. By framing the issue as a breach of state‑chartered banking authority, Custodia seeks to restore the balance between federal oversight and state regulatory prerogatives.

The outcome of an en banc rehearing could reverberate far beyond a single Wyoming‑based bank. A ruling that curtails the Fed’s discretion would open the door for other crypto‑friendly, state‑chartered banks to secure master accounts, potentially accelerating the integration of digital assets into mainstream payments. Conversely, affirming the Fed’s latitude would reinforce a centralized gatekeeping model, prompting the industry to explore alternative settlement networks or lobby for legislative change. Investors, regulators, and fintech innovators are watching closely, as the case may define the regulatory architecture for crypto banking in the United States for years to come.