Why Custodia’s Master Account Battle Matters

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Being granted a Federal Reserve master account would have allowed Custodia Bank to operate directly within the nation’s core financial system — a critical step for any banking institution.

However, the Federal Reserve Bank of Kansas City rejected Custodia’s application in 2023, citing risks “inconsistent with safe and sound banking practices” due to the bank’s crypto focus. Custodia had previously sued the Fed in 2022, alleging “unlawful delay” in the review process.

The decision marks another setback for crypto banking initiatives seeking to integrate with the traditional financial system under federal oversight.