Fed Offers Crypto Banks a Path to the Rails of Global Payments


Stablecoin issuers and cryptocurrency banks now have the ability to gain access to master accounts, giving them access to the global payments infrastructure.

The Federal Reserve’s Board of Governors unanimously decided to create a three-tiered approval procedure that would let businesses with “novel charters” apply for master accounts. A few of examples of these businesses include the cryptocurrency bank Custodia and the Kraken Bank, both of which the state of Wyoming issued special purpose depository institution (SPDI) licenses.

If approved, the modification would do away with the need for intermediate banks, which are now required for FinTechs and crypto banks to access domestic and international payment networks through Federal Reserve bank master accounts.

Fed Vice Chair Lael Brainard said in a statement that “the new criteria establish a uniform and open procedure to consider requests for Federal Reserve accounts and access to payment services in order to ensure a secure, inclusive, and creative payment system.”

The recommendations, according to the board, “provide a uniform, thorough, and transparent methodology for reserve banks to examine access requests on a case-by-case, risk-focused basis reflecting the institution’s overall risk profile and to mitigate, to the degree practicable, the risks identified.”

Financial innovation would be stifled, according to FinTechs, including crypto businesses and those who assist them, without master accounts and direct access to the payment rails.

The decision may also be significant for stablecoin issuers that have applied for banking licenses or may be compelled to do so under President Biden’s working group on cryptocurrencies’ suggestions, which would require all issuers of dollar-pegged cryptocurrencies to be banks.