Wyoming SPDI Charter History and the Custodia Fed Ruling

Wyoming’s Special Purpose Depository Institution charter, authorized in 2019, permits banks to accept deposits from legal entities while mandating that unencumbered liquid assets cover at least 100 percent of those liabilities. This structure explicitly prohibits commercial lending with fiat currency, meaning SPDIs do not require Federal Deposit Insurance Corporation insurance. Kraken Bank received the first such charter in September 2020, followed by Avanti Bank, now known as Custodia, in October 2020. Commercium Financial secured the fourth approval on August 9, 2021, positioning itself as the first U.S. digital bank to tokenize real-world assets. The Wyoming Division of Banking began accepting applications in October 2019, and the State Banking Board oversees these institutions under Title 13, Chapter 12 of state law.

The Master Account Battle

Custodia applied for a Federal Reserve master account in October 2020, seeking direct access to payment systems without intermediary banks. The Kansas City Fed denied the application in January 2023, citing heightened risks from the bank’s "novel" and "crypto-asset focused" business model. Custodia sued in June 2022, arguing that the Monetary Control Act requires services to be available to eligible state-chartered banks. A federal judge ruled for the Fed in March 2024, and the Tenth Circuit Court of Appeals affirmed that decision on October 31. The majority opinion held that Section 342 of the Federal Reserve Act grants discretionary authority to reserve banks, rejecting the argument that statutory language creates a mandatory duty. Judge Timothy Tymkovich dissented, warning that the ruling grants "significant yet unreviewable executive authority" to unappointed officials who are chosen by private boards rather than Congress or the executive branch.

Custodia petitioned the Supreme Court to review the Tenth Circuit’s decision, citing recent cases like Trump v. Cook regarding the limits of executive power. The bank argued that regional Fed presidents possess "unbounded, unreviewable discretion" that flouts statutory text and undermines state banking prerogatives. In March 2026, the Tenth Circuit denied an en banc rehearing by a vote of 7-3, leaving the lower court rulings intact. This outcome keeps crypto-focused banks locked out of the central banking system unless they secure a limited-purpose account, a path recently taken by Kraken Financial. The Supreme Court has not yet issued a ruling on whether it will hear the case, leaving the constitutional question of appointment authority unresolved.

Regulatory Shifts and Capital Rules

Wyoming amended its SPDI regulations in 2025 to provide a pathway for conversion into public trust companies, requiring institutions to file detailed asset transfer plans and obtain shareholder approval. The legislation lowered the minimum deposit requirement from $5,000 to $1,000 and removed restrictions limiting depositors to legal entities. Effective July 1, 2025, new capital rules mandate a paid-up surplus fund of at least 20 percent of authorized capital stock. These changes aim to modernize the framework while maintaining strict reserve requirements. However, the lack of FDIC insurance remains a significant drawback, as SPDIs must rely solely on state capital requirements which fall far short of the 7 percent common equity tier 1 ratio required for federally supervised banks.

The persistent constraint for both Wyoming SPDIs and Nebraska digital asset depository institutions is Federal Reserve master account access. While the Fed has articulated a proto-fence in its application guidance, stating that traditional banks are likely to receive accounts while exotic models face scrutiny, it has refused to draw bright lines. This vagueness allows the Fed to maintain discretion but invites arbitrary decisions that judicial branches view unfavorably. If the Supreme Court does not intervene, Congress or the courts will eventually define the boundaries of this power. For now, the velvet rope approach stands, effectively barring many digital asset banks from the core infrastructure of the U.S. financial system.