The Blockchain Association is asking the U.S. Supreme Court to take up Custodia Bank’s fight with the Federal Reserve, arguing that the central bank should not have broad authority to deny payment system access to eligible state-chartered banks.
In an amicus brief filed Wednesday in support of Custodia’s petition, the crypto trade group said a lower court ruling for the Fed gives federal regulators a quiet mechanism to cut lawful businesses out of the banking system.
「The decision ratifies the Fed’s misuse of its payment services to further an impermissible policy goal—debanking the digital-asset industry,」 the Blockchain Association wrote.
The dispute centers on a Fed master account
An amicus brief is a filing by a party not directly involved in the case that wants to provide added legal arguments or context. In this instance, the Blockchain Association is backing Custodia’s request for Supreme Court review.
At the center of the case is Custodia’s bid for a Federal Reserve master account. Custodia, a Wyoming-based crypto bank, offers institutional clients digital-asset custody, payments and settlement infrastructure, and products tied to dollar-backed stablecoins. It has spent years trying to secure a master account, which would allow it to settle payments directly with the central bank.
In October, an appeals panel ruled that eligibility by itself did not entitle Custodia to an account. In December, the bank asked the full Tenth Circuit to rehear the matter.
Group says ruling threatens the dual banking system
The Blockchain Association said the Fed’s denial threatens the U.S. dual banking system, where both state and federal authorities can charter banks. If the ruling stands, the group argued, federal regulators could override state banking decisions simply by denying access to the payments system.
「Whether federal regulators, based on their own discretionary whims, can intrude on state prerogatives and debank lawful businesses is a question of exceptional importance with broad consequences for the national economy,」 the filing said.
Brief invokes Operation Choke Point 2.0
The brief described Custodia’s case as the latest phase of Operation Choke Point 2.0, referring to a term used by critics of Obama- and Biden-era policies that they said pressured banks to cut ties with disfavored industries.
「In a well-documented campaign termed Operation Choke Point 2.0, the federal government under the prior administration ‘used vague rules, excessive discretion, informal guidance, and aggressive enforcement actions to pressure banks away from serving digital asset clients’ and engaging with digital assets,」 the brief said.
Supreme Court has not agreed to hear the case
The Supreme Court has not agreed, at least for now, to hear the dispute. The brief asks the justices to decide how much control the Federal Reserve should have over access to the U.S. payments system.