Kraken Breaks Fed Barrier as First Crypto Firm Granted Master Account Access

US crypto exchange Kraken has secured a limited-purpose master account from the Federal Reserve Bank of Kansas City, giving its banking unit direct access to the Fed’s core payments infrastructure in what marks a first-of-its-kind breakthrough for the digital asset industry.

Kraken Financial, the Wyoming-chartered banking arm of the exchange — legally known as Payward Financial — will operate as a “Tier 3” entity with access to the central bank’s payment system, Fedwire.

Kraken co-CEO Arjun Sethi said the connection allows the firm to move funds on the same rails used by traditional banks and credit unions, reducing reliance on correspondent banks and enabling closer integration between fiat liquidity and crypto services.

"With a Federal Reserve master account, we can operate not as a peripheral participant in the US banking system, but as directly connected financial institutions. "

Through Fedwire settlement, the exchange’s banking arm can process dollar payments more directly, potentially improving the efficiency of fiat-to-crypto flows.

The approval, however, stops short of granting the full privileges enjoyed by traditional banks. Kraken’s account does not include access to services such as earning interest on reserves held at the Federal Reserve, underscoring the skepticism regulators are having toward integrating crypto firms into core financial infrastructure.

A “Skinny Account” Test for Crypto’s Entry Into the Fed

According to the Kansas City Fed, the approval grants Kraken Financial a limited-purpose account for an initial one-year term, with restrictions tailored to the firm’s business model and risk profile.

The arrangement resembles the “skinny master account” concept proposed by Federal Reserve Governor Christopher Waller in 2025, which envisions scaled-down access to Fed services based on a company’s regulatory standing and operational risks.

Observers say the decision represents a notable shift in tone from US regulators, who have historically been accused by the industry of keeping crypto firms at arm’s length from the traditional banking system.

Journalist Eleanor Terrett described the move as a “historic shift,” suggesting it signals confidence in Kraken’s anti-money laundering and sanctions compliance practices, as well as in Wyoming’s regulatory framework for special purpose depository institutions.

US Senator Cynthia Lummis also hailed the decision as a “watershed milestone” for digital assets in the United States, noting that greater access to core financial infrastructure could help bridge the long-standing divide between crypto companies and traditional banking institutions.

The approval arrives as other crypto-focused financial firms continue to pursue similar access. Custodia Bank, for example, has spent years seeking a Federal Reserve master account and has continued its efforts through legal channels after earlier setbacks.

Could Kraken’s Win Open the Floodgates?

Kraken’s approval could mark the beginning of a broader shift in how US regulators integrate crypto firms into the financial system. While the limited nature of the account shows the Fed is still proceeding cautiously, the decision effectively establishes a precedent that other regulated crypto institutions may attempt to follow.

If additional firms are able to secure similar “skinny” master accounts, the industry could gradually gain more direct access to the Federal Reserve’s payment rails — a development that would significantly reduce dependence on traditional banking intermediaries.

Over time, that could reshape how fiat moves into and out of the crypto ecosystem and potentially encourage a wave of regulated crypto banks seeking the same foothold inside the US financial system.