The Federal Reserve has made it possible for stablecoin issuers and crypto banks to acquire access to master accounts, which would give them access to the world’s payments system.
The Board of Governors of the Federal Reserve unanimously agreed to establish a three-tiered review process that would permit organizations with “novel charters” to apply for master accounts. Examples of such organizations include the crypto bank Custodia and the Kraken Bank, both of which were granted special purpose depository institution (SPDI) charters by the state of Wyoming.
If authorized, the change would eliminate the requirement for crypto banks and other FinTechs to go via a middle bank in order to access the domestic and global payment networks that Federal Reserve bank master accounts allow access to.
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.
