Crypto and banks spar in comments on Fed’s ‘skinny master account’ idea

The Federal Reserve’s proposal to formalize guidelines for granting access to its master accounts has ignited a vigorous debate between traditional banking giants and the emerging world of cryptocurrency and FinTech firms. The Fed’s initiative, intended to streamline the review process for novel financial institutions, has been met with polar opposite commentary regarding the stability of the U.S. financial system.

Master accounts provide direct access to the Fed’s core payment services, including the settlement of transactions. Historically reserved almost exclusively for federally chartered banks, the expansion of access to state-chartered non-bank institutions—often referred to as ‘skinny master accounts’ due to their limited operational scope—is seen by crypto firms as essential for lowering costs and enhancing efficiency.

**Traditional Banks Warn of Systemic Risk**

Major banking trade groups, including the American Bankers Association (ABA) and the Bank Policy Institute (BPI), strongly opposed granting direct access to institutions lacking comprehensive federal oversight, especially federal deposit insurance. Their comments emphasized that extending these privileges to non-bank entities introduces substantial risk, including liquidity, credit, and operational vulnerabilities, directly into the central banking infrastructure.

Banks argue that allowing institutions like cryptocurrency custodians or Special Purpose Depository Institutions (SPDIs) direct access to the Fed amounts to regulatory arbitrage. They contend that novel institutions would benefit from the implicit safety guarantee of the Federal Reserve system without being subject to the strict regulatory and supervisory requirements applied to federally chartered banks, potentially destabilizing regional and community banks.

**Crypto Firms Demand Fair Access**

Conversely, FinTech and digital asset companies argue that the current correspondent banking system is inefficient, costly, and discriminatory. Firms specializing in blockchain technology and payment processing state that they are often denied correspondent services or charged exorbitant fees, stifling competition and innovation.

These applicants argue that as long as they meet the Fed’s rigorous operational and safety standards, they should not be penalized simply because of their business model or lack of FDIC insurance. They emphasize that limiting access restricts the development of faster, cheaper payment systems, particularly in the digital asset space. Specific state-chartered entities, such as Wyoming’s SDFIs (Special Purpose Depository Institutions), have pushed back, asserting that their robust state regulatory framework already meets the necessary threshold for systemic inclusion.

**Fed’s Balancing Act**

The Federal Reserve Board is tasked with synthesizing these conflicting views. The final implementation of the master account access rules must balance the dual mandate of fostering innovation and competition while rigorously protecting the stability and integrity of the nation’s payment systems. The outcome of this process is expected to set a major precedent for how digital assets interact with core U.S. financial infrastructure.

Source: Crypto and banks spar in comments on Fed’s ‘skinny master account’ idea