Federal Reserve Considers Limited Access Accounts for Fintech Firms Amid Mixed Reactions

The Federal Reserve is evaluating a proposal to introduce 'skinny master accounts' that would grant fintech companies restricted access to the central bank's payment infrastructure. According to Cointelegraph, the proposal has garnered 44 comments from various stakeholders, including crypto firms and banking associations, with crypto entities largely supporting the initiative and banks expressing caution. Fed Governor Christopher Waller initiated the comment period in December, highlighting the necessity for new payment accounts due to rapid advancements in payment technologies. He emphasized that these accounts would foster innovation while ensuring the safety of the payment system. Unlike traditional master accounts held by major banks, these payment accounts would not accrue interest, have access to Fed credit, or exceed certain balance limits. Crypto companies have shown strong support for the proposal. Stablecoin issuer Circle, in a letter to the Fed, stated that these accounts would be a crucial step in advancing Congress' vision under the GENIUS Act and would significantly enhance U.S. payments. The Blockchain Payments Consortium described the accounts as a long-overdue addition that would eliminate anti-competitive practices and reduce risk concentration among a few banks. Anchorage Digital Bank, the first federally chartered crypto bank, pointed out specific deficiencies in the proposal, particularly concerning overnight balance limits, interest on reserves, and access to the Fed's automated clearing house. Conversely, banking associations have raised concerns about the proposal. The American Bankers Association argued that many entities eligible for payment accounts lack a consistent supervisory track record and are not subject to uniform federal safety standards. The Wisconsin Bankers Association emphasized that access should be contingent not only on legal eligibility but also on an institution's governance, risk management, internal controls, and compliance capabilities. Better Markets, a nonpartisan financial reform advocacy group, criticized the proposal as an irresponsible concession to the crypto industry, warning that it could unnecessarily expand the Fed's mandate and pose significant risks to the Federal Reserve System and the broader financial system. The Federal Reserve will review the feedback before finalizing its decision on the proposal, a process that may take several months.