Crypto banking access in the US: master accounts, the chokepoint, and what changed

Every discussion of crypto regulation in the United States eventually arrives at the same bottleneck. Before any question about whether a token is a security, before any debate about stablecoin reserves or exchange licensing, a crypto business needs a bank account. It needs one to hold customer funds, to make payroll, to pay vendors, and to connect to the payment infrastructure through which dollars move. For most of the past decade, getting and keeping that bank account has been the industry’s single most consequential operational problem, and the Federal Reserve’s control over who may access its payment rails has been the mechanism through which that problem operated. This page covers the two distinct access questions, the Fed’s master account system and ordinary commercial banking, the litigation and policy reversals that have reshaped both, and where the path stands as of August 2026.

What a master account is and why it matters

A master account is an institution’s direct connection to the Federal Reserve’s payment infrastructure. Without one, a bank or bank like institution cannot settle transactions through Fedwire, cannot access the Fed’s automated clearinghouse services, and cannot hold balances at the central bank. It must instead rent access through a correspondent banking relationship with an institution that does hold an account, paying fees and accepting the correspondent’s risk appetite as a constraint on its own operations.

For traditional banks, master accounts are routine. A state chartered bank that obtains deposit insurance and meets supervisory requirements receives an account as a matter of course. The question becomes complicated for institutions that are chartered but not insured, institutions like Wyoming’s special purpose depository institutions, which hold state charters authorizing them to custody digital assets but do not take federally insured deposits.

The Monetary Control Act of 1980 requires the Federal Reserve to make its services available to eligible depository institutions. Custodia Bank and its supporters read that language as creating an entitlement: if an institution is eligible, the Fed must provide access. The Federal Reserve and the Tenth Circuit read the Federal Reserve Act as granting Reserve Banks discretion over whether to open an account, meaning eligibility is necessary but not sufficient. That interpretive dispute is the legal core of the access question, and it remains unresolved at the Supreme Court level.

The practical consequence of discretion is a gatekeeping function. If Reserve Banks may decline applications from eligible institutions, the criteria they apply and the process they follow determine which business models can access the payment system directly and which must operate through intermediaries. For crypto native institutions, which incumbent banks have historically been reluctant to serve as correspondents, discretion has functioned as a barrier to entry into the financial system itself.

The tiered review framework and what the numbers show

The Federal Reserve adopted a tiered review framework in 2022 to evaluate master account applications, sorting applicants into three categories based on how closely they resemble traditional insured depository institutions.

Tier 1 covers institutions that are federally insured. Their applications receive the most straightforward review. Tier 2 covers institutions that are not federally insured but are subject to prudential supervision by a federal banking agency. Tier 3, the category that captures crypto focused institutions like Custodia and Kraken, covers institutions that are not federally insured and not subject to federal prudential supervision, even if they hold state charters.

The numbers tell a story the framework’s text does not. Between December 2022, when the tiered system took effect, and May 2026, three Tier 3 applicants received a master account. No Tier 2 applicants were approved during that period. About half of Tier 3 applicants either withdrew or were rejected, and several applications have been pending for years without resolution. As of August 2026, 357 institutions without federal deposit insurance hold master accounts, roughly 4% of all account holders, but almost all of those accounts predate the tiered framework.

Public Law 117-263 requires the Fed to publicly disclose institutions that have requested, been rejected for, or been granted master accounts, and the Fed maintains a database accordingly. That transparency was itself a legislative response to concerns that the application process operated without accountability.

The gap between the framework’s stated neutrality and its operational record is the strongest argument that discretion has functioned as a chokepoint. The counter argument is that Tier 3 applicants present novel risks that justify extended review, and that approving uninsured, crypto focused institutions without thorough evaluation would introduce safety and soundness concerns into the payment system. Both positions have merit, which is why the question has ended up in court.

The Custodia case and what the courts decided

Custodia Bank, a Wyoming chartered special purpose depository institution founded by Caitlin Long, applied for a Kansas City Fed master account in October 2020. The application sat for over two years before the Fed formally denied it in January 2023, citing what it described as an unprecedented business model and safety and soundness concerns tied to an uninsured, undiversified, crypto focused institution.

The denial landed the same day the Fed adopted the guidance that was later rescinded in December 2025, a timing coincidence Custodia has argued is significant, contending that the denial relied on guidance that was not yet final when the application was evaluated. That argument is Custodia’s, and this page reports it without adopting it.

A Wyoming federal district court ruled against Custodia on the merits in 2024, and the Tenth Circuit affirmed 2 to 1 on October 31, 2025. The majority held that the Federal Reserve Act grants Reserve Banks discretion over master account access, rejecting Custodia’s reading of the Monetary Control Act as creating a mandatory obligation. The dissent argued that the statutory text was clearer than the majority acknowledged and that the Fed’s interpretation effectively gave it unchecked power to exclude eligible institutions.

En banc rehearing was denied 7 to 3 on March 13, 2026, with three judges dissenting from the refusal to rehear. Custodia sought an extension to July 10, 2026 to file a certiorari petition with the Supreme Court, docket 25A1320. The legal question, whether the Monetary Control Act requires Reserve Banks to make services available to eligible nonmember institutions or merely authorizes them to do so, is the kind of statutory interpretation question the Supreme Court sometimes takes, particularly where a circuit split exists or develops.

The case matters beyond crypto. The legal question reaches any nontraditional institution seeking payment system access, including fintechs, industrial loan companies, and novel charter holders. Crypto is the occasion for the litigation, not the limit of its implications, and stating that correctly is what distinguishes the legal analysis from trade coverage.

The procedural history also reveals how slowly the system moves relative to the industry it governs. Custodia applied in October 2020, received its denial in January 2023, lost at the district court in 2024, lost at the Tenth Circuit in October 2025, was denied en banc in March 2026, and is now seeking Supreme Court review. If the Court takes the case, a decision would likely arrive in the 2027 term, meaning the legal question could take seven years from application to final resolution. During that period, the crypto industry’s relationship with the banking system has gone through an entire cycle of restriction and partial reopening, the Fed has created a pilot program and proposed a new account type, and the competitive landscape has shifted materially. The gap between litigation speed and market speed is itself a structural argument for regulatory solutions over judicial ones, because by the time a court answers the question, the question may have been overtaken by events.

The guidance reversal of December 2025

On December 17, 2025, the Federal Reserve Board voted to rescind guidance adopted in January 2023 that had restricted how uninsured state member banks could operate. The rescinded guidance had imposed what it described as a same activity, same risks, same regulation standard, subjecting uninsured state member banks to constraints similar to those facing federally insured banks regardless of whether their actual risk profiles justified that treatment.

The replacement framework allows more tailored supervision, recognizing that different bank structures present different risks and that a single supervisory approach applied uniformly to institutions with different charters, insurance statuses, and business models may not serve the system well.

The reversal was significant but limited. It addressed how the Fed supervises uninsured state member banks that already hold master accounts or that operate within the Fed’s supervisory jurisdiction. It did not directly change the master account application process, which operates under separate authority. Custodia lost its Tenth Circuit appeal after the reversal, which confirms that the two questions, supervisory treatment and account access, are legally distinct even if they are politically connected.

The reversal also did not address the broader allegation that federal regulators pressured commercial banks to drop crypto customers entirely. That allegation, which has produced Congressional inquiries, document productions, and competing narratives from industry participants and former regulators, remains disputed. What the evidence shows is that multiple crypto companies lost banking relationships during the same period, that regulators issued guidance that banks read as discouraging crypto relationships, and that the regulatory posture has since changed. Whether the relationship losses resulted from coordinated pressure, individual bank risk decisions, or some combination is a question this page states without resolving, consistent with how our SEC and OCC pages handle similarly contested claims.

The Kraken pilot and the objection to it

In March 2026, the Federal Reserve granted Kraken, also a Wyoming SPDI, a 12 month pilot limited master account. The account carries restrictions on the types of transactions Kraken may process and the volumes it may handle, and the pilot is explicitly framed as an opportunity to test whether a crypto native institution can operate within the payment system safely.

Vice Chair Michelle Bowman characterized the pilot as a chance to learn from direct experience with a nontraditional institution, language that positions it as an empirical exercise rather than a policy commitment.

The Bank Policy Institute, representing roughly forty major banks, objected on procedural grounds. Its argument was that granting payment system access to an uninsured, undiversified institution through a one off pilot front ran the Board’s own public comment process and violated its stated policy of seeking comment before making significant changes to the payment system. The objection is procedural in form but competitive in substance: incumbent banks view payment system access for crypto institutions as a competitive threat, because direct access eliminates the correspondent banking fees that currently flow to incumbents and removes the risk appetite filter that correspondent relationships impose.

The pilot’s outcome will be measured against specific criteria, although those criteria have not been published in detail. If Kraken operates without incident for twelve months, the pilot creates a precedent that other Tier 3 applicants will cite. If problems emerge, the pilot provides evidence for maintaining the restrictive posture. Either way, the data will matter more than the arguments that preceded it.

The skinny account proposal

In May 2026, the Fed proposed a new category: a limited payment master account with an expedited approval process. Governor Christopher Waller described it as a skinny master account, and the label captures the design. The account would give qualifying institutions direct access to Fedwire for specific payment types without requiring the full supervisory relationship that a traditional master account entails.

The proposal responds to a structural problem the tiered framework created. Full master accounts carry full supervisory expectations, which creates an all or nothing dynamic: either an institution qualifies for comprehensive payment system access and comprehensive oversight, or it gets nothing. The skinny account would create a middle tier, matching limited access to limited supervision and reducing the review burden for institutions whose payment activity is narrowly defined.

The details of who would qualify, what payment types would be permitted, and what supervisory requirements would attach are the subject of the comment process. If finalized, the skinny account would be the most significant structural change to Fed payment system access in years, and it would directly address the bottleneck that has made the master account question so consequential for the crypto industry.

The proposal also carries implications for the Custodia litigation. If the Fed creates a streamlined access path that Custodia could use, the practical stakes of the Supreme Court case diminish even if the legal question remains open. Regulatory solutions that moot litigation are a recurring pattern in financial regulation, and the timing of this proposal, arriving while Custodia’s certiorari petition is under consideration, may not be coincidental.

The skinny account also raises a design question that has not received enough attention. If limited accounts carry limited supervision, the supervisory relationship is thinner, and the Fed’s ability to monitor what flows through those accounts is correspondingly reduced. Incumbent banks and their trade groups will argue that this creates a two tier system in which nontraditional institutions enjoy payment system access with less oversight than traditional banks face for the same services. The Fed’s response, visible in the proposal’s structure, is that limiting the account’s scope limits the risk, and that matching access to supervision on a proportional basis is sound regulatory design. Whether that proportionality argument survives the comment process intact will determine whether the skinny account arrives as a meaningful reform or a narrowly scoped pilot that changes little in practice.

Commercial banking access, which is a separate problem

Master accounts are the infrastructure layer. Commercial banking, meaning whether a crypto business can open and keep a bank account for payroll, operations, and customer funds, is a different and historically larger problem.

For most of the past decade, the primary banking challenge for crypto companies was not the Fed’s payment system. It was finding a commercial bank willing to maintain a relationship at all. Accounts were closed, sometimes with thirty days notice and no explanation. New accounts were refused at the compliance review stage. And the pattern was widespread enough to generate an industry term, debanking, and a political response that has included Congressional hearings, subpoenas for regulatory communications, and executive orders.

The commercial banking problem operated through a different mechanism than the master account problem. Banks made individual risk decisions about individual customers, but those decisions were influenced by supervisory guidance, examination practices, and what banks understood regulators to expect. When regulators signaled that crypto relationships carried elevated compliance risk, banks responded by reducing their exposure to the sector, because the cost of a regulatory finding exceeded the revenue from any individual crypto customer.

The reversal of that dynamic has been as visible as the initial restriction. Federal banking agencies withdrew or rescinded guidance that banks had read as discouraging crypto relationships. The OCC confirmed through interpretive letters that national banks may provide digital asset custody and settlement services, a development our OCC page covers in detail. The Federal Reserve ended its dedicated novel activities supervision program and returned crypto related banking to standard supervisory channels. And the wave of national trust charters granted in late 2025 and early 2026 signals that federal regulators now view crypto institutions as legitimate participants in the banking system.

The result is a banking environment that has shifted substantially in eighteen months. Crypto companies that could not maintain bank accounts in 2023 can now open them at multiple institutions. The stablecoin framework depends on banking relationships for reserve custody, and those relationships now function. And the commercial banking problem, while not fully resolved, has moved from an existential constraint to a manageable operational challenge.

The distinction between the two access problems is worth restating because coverage frequently blurs them. A master account is about infrastructure: whether an institution can settle directly through the central bank. Commercial banking is about relationships: whether a business can maintain an account at a private bank for its operational needs. A crypto company can have a commercial bank account without a master account, because the commercial bank provides indirect access to the payment system through its own master account. And an institution can hold a master account without solving its commercial banking needs, because the master account serves settlement functions, not operational banking. The two problems have different causes, different legal frameworks, different gatekeepers, and different solutions. Treating them as one problem produces analysis that is wrong in both directions, overstating the impact of master account reforms on day to day banking and understating how much commercial banking access depends on individual bank risk decisions that no regulation directly controls.

What is still unresolved

Three questions remain open, and each will shape the access landscape for years.

The Supreme Court question. Whether the Monetary Control Act creates a right to Fed services for eligible institutions or merely grants authority to provide them is a legal question that the Custodia petition puts before the Court. A decision granting certiorari would produce the first Supreme Court ruling on payment system access in decades and would bind every Reserve Bank. A denial would leave the Tenth Circuit’s discretion holding in place, which other circuits could adopt or reject.

The skinny account’s fate. The proposal is in the comment period. Whether it survives objections from incumbent banks and community banking groups, what qualifying criteria it carries, and how quickly it can be implemented will determine whether a middle path between full access and no access actually materializes.

The durability of the reversal. Every access improvement described on this page, the guidance reversal, the Kraken pilot, the skinny account proposal, the commercial banking thaw, rests on administrative action that a future administration could reverse. None is statutory. The GENIUS Act addresses stablecoin issuance, and the pending market structure legislation would address asset classification, but no enacted law guarantees crypto companies access to banking services or to the Fed’s payment system. That gap is the single largest structural vulnerability in the current access landscape, and it is the reason the industry’s position, while dramatically better than it was two years ago, remains provisional.

The relationship between master accounts and the broader regulatory architecture is also worth noting. An institution that obtains a national trust charter through the OCC, as our OCC page describes, still needs banking relationships for operations and may need a master account for settlement. The charter, the bank account, and the master account are three separate gates, and passing through one does not guarantee passage through the others. The current regulatory environment has opened all three more widely than at any point since 2020, but they remain independently controlled.

What to watch

The Custodia certiorari petition. The July 10, 2026 filing extension determines the timeline. If the Court takes the case, oral argument would likely fall in the 2026 to 2027 term. If it declines, the Tenth Circuit ruling stands and other circuits may follow or diverge.

The Kraken pilot’s twelve month review. The pilot began in March 2026, placing the initial review around March 2027. The outcome, measured in operational data, will shape every subsequent Tier 3 application and will either validate or undermine the case for broader access.

The skinny account comment period and finalization. Whether the Fed moves from proposal to final rule, and how quickly, determines whether a middle access tier exists. Watch for whether the final version narrows qualifying criteria under pressure from incumbent institutions.

Commercial banking relationship stability. The current thaw depends on regulatory posture. Track whether banks that have opened crypto relationships maintain them through examination cycles, because the test of durability is not whether a bank opens an account but whether it keeps one open after its next examination.

Legislative codification. Any bill that writes banking access protections into statute, whether standalone or as part of broader crypto legislation, would convert the current administrative improvements into durable law and would be the single most significant development on this page.

Disclaimer: This article is for informational purposes only and does not constitute financial, investment, or legal advice. Laws, regulations, and agency guidance change frequently; verify current status with primary sources. Information in this article is current as of August 11, 2026.