Fed Opens Door for Crypto: Public Input Sought on ’Skinny’ Accounts for Fintech & Digital Asset Firms

The Federal Reserve is finally asking the right questions. In a move that could reshape the financial plumbing for a generation, the central bank is soliciting public feedback on creating limited-purpose "master accounts"—often called 'skinny' accounts—for fintech and cryptocurrency companies.

Why This Matters

For years, crypto-native firms have operated in a regulatory gray zone, forced to rely on intermediary banks for access to the core payment system. A direct Fed master account would be a game-changer. It cuts out the middleman, allowing these companies to settle transactions in real-time, bypassing traditional banking bottlenecks that have stifled innovation and added layers of cost and risk.

The Devil's in the Details

The proposal isn't a blanket approval. The Fed is explicitly weighing the risks. These 'skinny' accounts would come with strict limitations on activities, a far cry from the full-service access enjoyed by traditional banks. Think of it as a restricted pass into the financial system's backroom—you can move boxes, but you can't touch the ledgers. The central question: can the Fed effectively supervise entities that don't fit the century-old mold of a chartered bank?

A Nod to the Inevitable

This consultation is a tacit admission. The future of finance is being built on blockchains and digital ledgers, not just in marble bank halls. By engaging now, the Fed is attempting to get ahead of the curve, aiming to integrate innovation rather than futilely fighting it. It's a delicate dance between fostering competition and maintaining systemic stability—with trillions in potential value hanging in the balance.

The clock is ticking for legacy finance to adapt or be bypassed. After all, the last great innovation in banking was the ATM, and that was decades ago—a fact not lost on a generation that banks from their smartphones.

Fed proposes designated accounts for crypto firms to access master accounts

The central bank’s board memo shared with news publications suggested that eligible institutions would be able to open so-called “skinny” accounts for payment services through the Fed master account. Currently, fintech firms and crypto companies rely on intermediary banks that already hold master accounts at Federal Reserve Banks to process transactions.

The central bank said the proposed payment accounts would not earn interest or access its credit facilities, and would be capped in size to nerf any risks to the financial system.

According to the proposal, the Federal Reserve is considering an overnight balance cap equal to the lesser of $500 million or 10% of an institution’s total assets. The accounts would be restricted to the account holder’s own transactions, which means firms would be barred from issuing correspondent banking services or settling payments on behalf of third parties.

Moreover, reserve banks would retain the discretion to impose restrictions and risk controls on a case-by-case basis, alongside other safeguards, including account agreement conditions, formal attestations, and periodic reporting requirements.

Economists debate over crypto safeguards and oversight

Some policymakers, like Governor Michael Barr, do not support the proposal in its current form. Barr, who is a Democratic appointee who previously served as the Fed’s top regulatory official, opposed the request for information because it “lacks sufficient detail on protections against financial crime.”

Some policymakers, like Governor Michael Barr, do not support the proposal in its current form. Barr, a Democratic Fed regulatory official during the Obama administration, opposed the request for information because it “lacks sufficient detail on protections against financial crime.”

The former Assistant Secretary of the Treasury for Financial Institutions warned that the proposal is “not sufficiently specific about safeguards to protect against the accounts being used for money laundering and terrorist financing by institutions the Fed does not supervise.”

As reported by Cryptopolitan last week, the Board scrapped a 2023 rule and replaced it with a new framework that gives state member banks more flexibility to deploy innovative tools. The policy had required state member banks to follow activity restrictions similar to those imposed by other federal regulators. 

After months of consultations and public sentiment, the board concluded that changes in the financial system and its own understanding rendered the rule ineffective, finally signing off on its withdrawal.

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