Crypto Firms and Banking Associations Weigh In on the Fed’s “Skinny Master Account” Proposal
Washington, D.C., Feb. 9 — The Federal Reserve is reviewing feedback from a diverse set of market participants on a draft rule that would create a new class of “payment accounts” for fintech and crypto companies. The accounts, dubbed “skinny master accounts,” would grant limited access to the central bank’s payment infrastructure while imposing strict caps on balances and withholding a number of the privileges enjoyed by traditional master accounts held by large banks.
The proposal in brief
In December, the Fed opened a public comment period on its plan to extend a type of payment account to non‑bank entities. Unlike the master accounts that enable large depository institutions to hold reserves, earn interest and tap the Fed’s automated clearing house (ACH) for same‑day and international payments, the proposed accounts would:
- Carry a balance ceiling – the Fed suggested an overnight limit set at the lesser of $500 million or 10 % of the holder’s total assets.
- Earn no interest – balances would not accrue the interest that reserve‑holding banks receive.
- Lack direct ACH access – users would not be able to initiate or receive same‑day ACH transactions directly through the Fed.
The Fed’s rationale, outlined by Governor Christopher Waller, is that the rapid evolution of digital payments “requires new tools that support innovation while preserving the safety and soundness of the payments system.”
Crypto industry’s response
Circle
Stable‑coin issuer Circle submitted a letter emphasizing that the payment accounts would advance the objectives of the GENIUS Act, a congressional measure aimed at modernizing the U.S. payments landscape. Circle argued that the accounts would “materially strengthen U.S. payments” by providing a direct conduit to the central bank, reducing reliance on legacy intermediaries.
Blockchain Payments Consortium
The newly formed Blockchain Payments Consortium echoed Circle’s sentiment, calling the accounts an “overdue and much‑welcomed addition.” Its members contend that the proposal could curb uncompetitive pricing practices and diffuse systemic risk that currently concentrates among a handful of large banks.
Anchorage Digital Bank
Anchorage, the nation’s first federally chartered crypto bank, acknowledged the concept but highlighted “specific deficiencies” that need addressing. In particular, it raised concerns about the adequacy of overnight balance limits, the absence of interest on reserves, and the lack of direct access to the Fed’s clearing house, which could impede the efficient settlement of transactions.
Overall, the crypto community submitted roughly half of the 44 comments received, positioning the accounts as a foundational step toward broader integration of digital assets into the mainstream financial system.
Banking sector’s cautions
American Bankers Association (ABA)
The ABA warned that many prospective account holders “lack a long‑run supervisory track record” and are not uniformly subject to existing federal safety‑and‑soundness standards. The association stressed that extending Fed access to entities with evolving regulatory frameworks could introduce supervisory gaps.
Wisconsin Bankers Association
Echoing the ABA, the Wisconsin group argued that eligibility should hinge not only on legal criteria but also on demonstrable governance, risk‑management, internal‑control, and compliance capabilities.
Better Markets
The nonprofit advocacy group Better Markets labeled the proposal an “irresponsible and reckless giveaway to the crypto industry.” It contended that the accounts would “implicitly and unnecessarily” broaden the Fed’s mandate and expose the Federal Reserve System to heightened risk.
Collectively, the banking commentaries reflect a broader concern that the Fed’s core infrastructure—designed for regulated depository institutions—might be strained by the inclusion of fintech and crypto players lacking comparable oversight.
Analysis
The Fed’s initiative sits at the intersection of two competing pressures: the desire to foster payment‑system innovation and the imperative to safeguard the integrity of the nation’s monetary infrastructure. By offering a stripped‑down, “skinny” version of a master account, the Fed appears to be testing a middle ground—granting limited liquidity and settlement capabilities without extending the full suite of privileges that could amplify risk.
Potential benefits
- Enhanced liquidity for crypto firms – Direct access to Fed balances could reduce reliance on correspondent banking relationships, lowering transaction costs and latency.
- Improved monetary‑policy transmission – If crypto‑based payment flows become more tightly linked to the Fed’s balance sheet, policy actions may reach a broader segment of the economy.
Potential drawbacks
- Regulatory arbitrage – Entities might exploit the limited‑privilege accounts to skirt more stringent banking regulations, especially if oversight mechanisms lag.
- Operational risk – Introducing a multitude of new participants into the Fed’s payment rails could increase complexity, testing the system’s resilience.
The Fed’s final rule is expected to take several months, during which it will likely refine the balance‑limit methodology, consider whether any form of interest should be applied, and assess whether a limited ACH gateway could be safely offered.
Key takeaways
- The Fed is exploring “skinny master accounts” that grant fintech and crypto firms limited access to its payment infrastructure, with strict balance caps and no interest provision.
- Crypto stakeholders—Circle, the Blockchain Payments Consortium, and Anchorage—generally support the move, citing increased efficiency and alignment with legislative goals.
- Banking associations and advocacy groups caution that the proposal could dilute supervisory standards and expand the Fed’s mandate beyond its traditional remit.
- The final rule will likely balance innovation incentives against systemic‑risk safeguards, potentially shaping the next phase of U.S. payments modernization.
As the Federal Reserve processes the diverse feedback, the outcome will signal how the United States intends to blend emerging digital‑asset ecosystems with the entrenched architecture of its central banking system.
Source: https://cointelegraph.com/news/crypto-banks-input-fed-skinny-master-account-proposal?utm_source=rss_feed&utm_medium=feed&utm_campaign=rss_partner_inbound
