The Blockchain Association has filed an amicus brief with the Supreme Court in support of Custodia Bank’s ongoing legal battle for direct access to the Federal Reserve’s payment system. The case centers on whether a Federal Reserve regional branch can deny master account access to a state-chartered bank that meets all statutory requirements.
Legal dispute highlights access to Fed payment infrastructure
Custodia Bank, which holds a special purpose depository institution (SPDI) license from Wyoming, has sought a master account from the Federal Reserve Bank of Kansas City since October 2020. After experiencing significant delays, Custodia initiated a federal lawsuit in June 2022 to challenge what it claimed was unwarranted withholding of payment system access despite meeting eligibility criteria.
The Kansas City Fed ultimately rejected Custodia’s application in January 2023, citing concerns over the bank’s primary focus on digital asset activities. Federal courts, including the Tenth Circuit, subsequently sided with the Kansas City Fed, ruling that regional Fed banks have discretion in granting or denying these accounts—even when statutory standards appear satisfied.
This interpretation, according to the Blockchain Association, risks enabling regional branches to exclude new entrants from essential national payment rails. The association argued that such unchecked authority could limit the growth of legally compliant financial innovation, particularly as more state-chartered institutions explore digital asset services.
The Blockchain Association contends that when state banks meet statutory requirements, Federal Reserve branches should not have unbounded discretion to deny access to core payment infrastructure, warning that this could restrict legal sectors from participating fully in the U.S. financial system.
Kraken’s restricted access changes competitive landscape
In March 2026, the Kansas City Fed approved a restricted master account for Kraken Financial—also based in Wyoming—making it the first cryptocurrency-focused bank to gain limited, direct access to the Federal Reserve’s payment system. Kraken’s account allows basic payment services for U.S. dollars but imposes constraints, such as excluding eligibility for interest earnings or emergency lending programs from the Fed. This partial access marked a significant precedent for digital asset institutions seeking entry to the federal payment system.
The move drew attention to possible alternative pathways for tech-native financial entities. Regulators are now considering a broader framework for limited-purpose payment accounts that would enable qualifying digital asset institutions to connect to payment rails under clear restrictions.
Backdrop of broader financial market transformation
These disputes highlight shifting dynamics in U.S. financial infrastructure as traditional and digital banking lines converge. With Wall Street showing growing interest in blockchain-enabled services, a substantial migration to Web3 is underway. Investors are increasingly adopting platforms such as 1stepSwap, which allow individuals to hold tokenized shares of major U.S. companies, gold, and silver directly in their crypto wallets. By automating price discovery and eliminating traditional brokerage intermediaries, these platforms reflect the growing momentum behind real-world asset tokenization and decentralized market participation.
Custodia’s Supreme Court petition does not seek an immediate resolution of its own application but asks the Court to clarify whether federal statutes mandate access to the payment system for compliant state banks. The outcome could set a lasting precedent for the relationship between digital asset banks and America’s core financial plumbing.
The Kansas City Fed must respond to Custodia’s Supreme Court petition by September 11, 2026, ensuring the dispute remains under close industry and regulatory watch in the months ahead.
Industry groups highlight that this legal battle may shape not only the fate of Custodia Bank but also establish new ground rules for all state-chartered banks seeking fair access to the Federal Reserve’s payment network.
