Key Takeaways
- The Federal Reserve is seeking public comment on a new "payment account" system, often called a "skinny master account."
- This account type is designed to provide fintech and crypto firms with direct access to the Fed's payment rails without requiring a full banking charter.
- Fed Governor Christopher Waller stated the move aims to "support innovation while keeping the payments system safe."
- Not all officials agree, with concerns raised about money laundering and terrorist financing risks for non-supervised institutions.
- If implemented, this could mark a significant policy shift for crypto firms, which have previously complained of being "de-banked."
A New Gateway for Fintech and Crypto Innovation
The U.S. Federal Reserve has taken a significant step toward modernizing the national payments infrastructure by formally requesting public feedback on a proposed "payment account." This new account type, informally dubbed a "skinny master account," is specifically designed to attract fintech companies and digital asset firms by offering them a pathway to connect directly to the central bank's core systems.
Currently, only depository institutions like traditional banks can hold "master accounts" with the Fed, granting them direct access to its payment and settlement services. The new proposal would create a narrower, more restricted version of this access for non-bank payment providers.
Driving Forces Behind the Proposal
Fed Governor Christopher Waller, a key proponent, framed the initiative as a necessary adaptation to a changing financial landscape. He noted that the Fed is introducing this feature to reflect the "rapid developments" in the payments industry, which have spurred "innovative approaches to banking" and new business models.
"These new payment accounts would support innovation while keeping the payments system safe," Waller said in a statement.
This move aligns with the Fed's broader exploration of blockchain-based payment technologies to update the U.S. financial system's backbone.
Potential Impact on the Crypto Industry
The proposal could be a watershed moment for the cryptocurrency sector. Major U.S.-based crypto payments companies like Circle, Coinbase, Kraken, and Block, Inc. could be prime candidates to utilize these accounts.
Inclusion would represent a dramatic turnaround. Throughout 2023, many crypto companies alleged a coordinated effort—dubbed "Operation Chokepoint 2.0" by industry advocates—by the Biden administration and regulators to sever their access to traditional banking services, effectively stifling the industry.
Diverging Views and Key Limitations
Not all Federal Reserve officials are in agreement. Governor Michael Barr expressed caution, arguing that seeking public input on the plan could pose risks if safeguards against money laundering and terrorist financing are not explicitly defined, particularly for institutions the Fed does not directly supervise.
Furthermore, the proposed accounts come with significant restrictions compared to full master accounts:
- They would not earn interest.
- They would have no access to Fed credit or discount window facilities.
- They would be subject to balance caps and other operational limits.
In essence, while providing crucial payment rail access, these accounts would not confer the same privileges enjoyed by large banks and Wall Street institutions.
Next Steps and Timeline
The public comment period for the payments account plan will remain open for 45 days following its publication in the Federal Register. According to Waller, the Fed anticipates the new payment account feature could become operational by the fourth quarter of 2026, marking a multi-year path to potential implementation.
