Key Takeaways
- The Federal Reserve seeking public input on payment
accounts that could give crypto firms and fintechs direct access to
central bank systems.
- The proposal would bypass some traditional bank
approval pathways.
- The move has broad implications for financial
stability, regulation, and innovation.
WASHINGTON D.C. (NewsBlock) -
The Federal Reserve seeking public input on payment
accounts said on Monday it is exploring a framework that could allow crypto
firms and fintech companies direct access to central bank payment systems
without going through traditional bank approvals.
The request for comment marks a
significant moment in U.S. financial policy, as it could reshape who is allowed
to connect directly to the Fed’s core infrastructure, including systems that
settle trillions of dollars in payments each day.
In a notice published for public
consultation, the Fed outlined a proposal for so-called “payment accounts” that
would permit certain nonbank institutions to hold balances and conduct
transactions directly with the central bank. The Fed said it is seeking
feedback on the design, eligibility criteria, and potential risks of such
accounts.
“These accounts could support innovation in payments while maintaining safety and soundness,” the Fed said in the notice. “Public input will inform whether and how such access should be provided.” The Fed did not specify which crypto firms or fintechs might qualify, nor did it propose a timeline for implementation.
Currently, direct access to Federal
Reserve accounts is largely limited to federally chartered banks and a small
number of government-sponsored entities. Crypto companies and most fintech
firms must rely on intermediary banks to access payment rails such as Fedwire
or the Automated Clearing House network.
Granting direct access would
represent a major shift. It could reduce costs, speed settlement, and lower
dependency on traditional banks, but it could also raise questions about risk
management, supervision, and the role of the central bank.
“This is one of the most
consequential infrastructure questions the Fed has raised in years,” said Jaret
Seiberg, a financial policy analyst at TD Cowen. “Who gets an account at the
Fed goes to the heart of the financial system.”
The debate over central bank access
intensified after several crypto-friendly banks collapsed in 2023, disrupting payment
services for digital asset firms. Since then, crypto companies have argued that
reliance on a small number of banking partners creates systemic
vulnerabilities.
Supporters of broader access say payment accounts could reduce concentration risk and allow innovative firms to operate more safely. “Direct access could lower counterparty risk and improve transparency,” said Kristin Smith, chief executive of the Blockchain Association. “It would also reduce the choke points that have caused disruptions in the past.”
Critics, however, warned that
allowing nonbanks to plug directly into Fed systems could introduce new risks. “The Fed would be extending its
balance sheet and operational exposure to firms that do not face the same
prudential oversight as banks,” said Karen Petrou, managing partner at Federal
Financial Analytics. “That is not a small change.”
Banking trade groups have long
opposed expanding Fed access, arguing it could weaken the traditional banking
model and encourage regulatory arbitrage.
The Fed said it is particularly
interested in comments on how payment accounts should be supervised, how risks
should be mitigated, and whether access should be limited to certain activities
such as payments and settlement.
Officials stressed that the proposal does not amount to approval of any specific crypto firm. “This is about gathering views, not granting accounts,” a Fed spokesperson said, declining to comment further.
The proposal intersects with ongoing
debates in Congress over how to regulate digital assets and fintech companies.
Lawmakers in both parties have introduced bills aimed at clarifying the legal
status of stablecoins, payment firms, and nonbank financial institutions.
Some Republicans have argued that
regulators have used access to payment systems as a backdoor way to limit
crypto activity, while some Democrats have raised concerns about financial
stability and consumer protection.
“This consultation will be viewed
through a political lens whether the Fed wants it or not,” said Seiberg.
The Fed has previously rejected
applications from certain crypto-focused institutions seeking master accounts,
citing concerns about safety, soundness, and compliance. Those decisions
sparked lawsuits and criticism from industry groups.
By seeking public input on a broader framework, the Fed appears to be responding to pressure to clarify its approach rather than making case-by-case decisions behind closed doors. “Transparency matters here,” said a former Fed official who declined to be named. “The lack of clear rules has created uncertainty for everyone.”
The consultation also raises
questions about how payment accounts would interact with emerging technologies
such as stablecoins and tokenized deposits. Some analysts said direct Fed access
could accelerate adoption of dollar-backed digital assets for payments and
settlement.
“If fintechs can settle directly
with the Fed, it changes the economics,” said Chris Brummer, a professor at
Georgetown University Law Center. “But it also changes the risk profile.” The Fed emphasized that any payment
accounts would not be equivalent to deposit insurance and would not imply
government backing of the account holder’s broader business activities.
Internationally, other central banks
are grappling with similar issues. The Bank of England and the European Central
Bank have studied expanded access models, while some jurisdictions have allowed
nonbanks limited participation in payment systems under strict controls.
U.S. policymakers have watched those
experiments closely, though differences in legal frameworks complicate direct
comparisons. “This is not happening in a vacuum,”
Brummer said. “The global context matters.”
Financial markets showed little
immediate reaction to the Fed’s announcement, though shares of some fintech
firms rose modestly in early trading. Analysts said the lack of detail makes it
difficult to assess near-term impact. “Right now, this is about process,
not outcomes,” said a strategist at a major U.S. bank.
The Fed said written comments will
be accepted for a defined period, after which staff will review submissions and
present options to the Board of Governors. Any final decision would require
board approval and potentially further rulemaking.
The central bank did not indicate
whether it would coordinate with other regulators, such as the Federal Deposit
Insurance Corporation or the Office of the Comptroller of the Currency, though
analysts said interagency coordination is likely.
The issue of payment account access is expected to remain contentious. Industry groups are preparing detailed submissions, while banks are mobilizing to defend their role at the center of the financial system.
“This is a fault line issue,” Petrou
said. “Innovation versus stability.”
What’s
Next
The public comment period will shape
whether the Federal Reserve moves forward with a formal proposal. Analysts said
the most likely outcome is a narrow framework with strict eligibility criteria
and limited functionality.
Congress may also weigh in,
particularly if lawmakers view expanded Fed access as a policy decision with
implications beyond payments. Hearings or legislative proposals could follow if
the issue gains momentum.
For now, the Fed’s request for input
signals that direct central bank access for crypto firms and fintechs is no
longer a fringe idea but a live policy question with far-reaching consequences
for the U.S. financial system.