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Crypto lobbying group the Blockchain Association has filed an amicus brief supporting the crypto custodian Custodia Bank in its Supreme Court petition where it fights the Fed’s denial of master accounts.
Crypto and banks unite for a common cause
In 2020, the Wyoming-chartered Custodia Bank applied for a Federal Reserve master account. This is essentially a “bank for banks,” or a platform that gives them access to the Fed’s payment rails. Without it, banks require middlemen to manage their transactions – something that costs time and money and risks their operations should the intermediary back out.
Nonetheless, the Kansas City Fed formally rejected it, citing “undue risk” and crypto-focused operations as a threat to financial stability. This sparked a multi-year legal battle, with Custodia arguing that the Fed is required by law to provide master accounts to any legally eligible depository institution.
So far, lower courts have sided with the Fed, ruling that regional reserve banks do not have a say in the matter.
The reason for unity
The Blockchain Association and other crypto advocates have stepped in to support Custodia as a way to set a precedent for future rulings. They argue that unchecked federal power will deny crypto service providers foundational banking services.
Current stance
While the case remains undecided, the Fed recently approved a “limited purpose” master account for Kraken exchange. The move shows a certain kind of accommodation that comes with tightly controlled boundaries for digital asset banking.