Wyoming Crypto Bank Files Petition Seeking Full Court Review of Fed Account Denial

A Wyoming chartered crypto bank has filed a petition requesting a full court review of a recent federal appeals decision that upheld the Federal Reserve’s denial of its application for a master account. The move represents a significant escalation in the legal battle between crypto focused banks and U.S. financial regulators.

The petition asks the full Tenth Circuit Court of Appeals to reconsider an earlier ruling issued by a three judge panel that sided with the Federal Reserve.

Bank Challenges Earlier Appeals Court Decision

The crypto bank, Custodia Bank, is seeking a rehearing en banc, a legal process that requires the full panel of appellate judges to review the case rather than the original three judge panel. Custodia argues that the earlier decision misinterpreted federal banking law and set a troubling precedent for state chartered institutions.

At the center of the dispute is the Federal Reserve’s refusal to grant Custodia access to a master account, which would allow the bank to directly access the U.S. payment system. Without such access, banks are forced to rely on intermediary institutions, significantly limiting their operational capabilities.

Why Fed Master Accounts Matter

Master accounts are essential infrastructure for banks operating in the United States. They enable direct settlement with the Federal Reserve, access to payment rails, and participation in the broader financial system.

Custodia contends that denying a master account to a legally chartered Wyoming bank undermines the dual banking system, which allows both state and federally chartered institutions to operate under U.S. law. The bank argues that the Federal Reserve exceeded its authority by applying discretionary standards not explicitly outlined in statute.

Broader Implications for Crypto Banks

The case has become a focal point for crypto friendly banks seeking clarity on their access to core financial infrastructure. A ruling in Custodia’s favor could strengthen the position of state chartered crypto banks and limit the Federal Reserve’s discretion in approving master accounts.

Conversely, if the denial is upheld, regulators would retain broad authority to block crypto focused institutions from direct access to payment systems, potentially slowing innovation and pushing activity offshore.

Legal experts note that the outcome could influence future litigation involving other digital asset banks and financial technology firms.

Regulatory Tensions Remain High

The petition highlights ongoing tensions between emerging crypto banking models and federal regulators. While several states have moved to support digital asset innovation through specialized charters, federal agencies have taken a more cautious approach, citing financial stability and risk management concerns.

Custodia maintains that it has met all applicable regulatory requirements and that its business model complies with existing banking laws. The Federal Reserve has not publicly commented on the petition.

Conclusion

The request for a full court review marks a pivotal moment in the ongoing dispute over crypto bank access to the U.S. financial system. The decision by the Tenth Circuit on whether to rehear the case could shape the regulatory landscape for state chartered crypto banks and define the limits of federal oversight.

As the legal process unfolds, the case is expected to remain closely watched by regulators, lawmakers, and the broader crypto industry.