House Financial Services Committee Ranking Member Maxine Waters (D-Calif.) asked the Federal Reserve Bank of Kansas City for information on its recent decision to approve a limited-purpose master account for Kraken Financial.
Policy Concerns: In the letter, Waters said granting a crypto firm access to the Federal Reserve’s payment system for the first time raises policy, regulatory, and consumer protection concerns. She said the announcement “raises questions about the approval because neither statute nor the Federal Reserve Board’s Account Access Guidelines refer to a ‘limited purpose account’ type.”
Requested Information: Waters requested information on whether:
-
Kraken’s account includes access to services such as FedACH, Check Services, FedCash, or Fedwire Securities Services.
-
The account is subject to restrictions on daylight overdrafts or overnight balances.
-
The Kansas City Fed imposed any heightened supervision, reporting, or risk-management requirements beyond those required under Wyoming law.
ICBA Response: Following the Kansas City Fed’s announcement earlier this month, ICBA expressed significant concerns with the decision, saying that granting nonbank entities and crypto institutions access to master accounts poses risks to the banking system. ICBA President and CEO Rebeca Romero Rainey said in a national news release that the Fed should continue limiting master account access to institutions that meet the financial services sector’s highest standards.
‘Skinny’ Account Issues: ICBA last month told policymakers it has significant concerns about the Fed’s bank payment account prototype—also known as a “skinny” master account—saying it is not clear that payment accounts would be subject to sufficient guardrails or subject to a true prototype program.
Background:
-
The Fed in December requested public comment on the proposed payment account, which eligible financial institutions could use for the limited purpose of clearing and settling their payments on Fed payment services, such as FedNow and Fedwire.
-
Nonbank entities and crypto institutions are trying to obtain access to master accounts—industry settlement accounts that are traditionally limited to insured depository institutions that are highly regulated and pose limited risk to the banking system.
ICBA View: As reported in Independent Banker magazine, ICBA supports limiting Fed account access to institutions that meet the financial services sector’s highest standards to protect the safety of the U.S. banking system. In a friend-of-the-court brief last year, ICBA told a U.S. appellate court that federal law provides the Federal Reserve Banks with the discretion to deny or grant master account access.