The Federal Reserve is hearing discussions from crypto companies and banking associations about a proposal to allow fintech companies so-called “skinny master accounts” that would limit their access to the central bank’s payments infrastructure.
The Fed received 44 comments on the proposal, which closed on Friday, and is seeking feedback on the “payment account” offering, with crypto companies backing the idea and banks urging caution.
Federal Reserve President Christopher Waller published comments on the proposal in December, saying the “rapid evolution” of payments necessitates new payment accounts and “supports innovation while keeping the payments system secure.”
Payment accounts would not have the same privileges as master accounts (generally owned by large banks), would not earn interest, would not have access to Fed credit, and would have balance limits.
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In response to the proposal, stablecoin issuer Circle said in a letter that the account “is an important first step in advancing Congress’s vision under the GENIUS Act,” claiming it would “significantly enhance U.S. payments.”
This is an excerpt from a letter sent by Mr. Circle to the Federal Reserve, arguing that opening payment accounts will benefit domestic payments. sauce: federal reserve system
The recently formed Blockchain Payments Consortium called the account an “overdue and highly welcome addition” and said it “eliminates anti-competitive practices that harm the interests of consumers and concentrate risk in a small number of banks.”
Anchorage Digital Bank, the country’s first federally chartered cryptocurrency bank, said it needs to address “certain deficiencies” in the proposal regarding overnight balance limits, interest on reserves, and access to the Fed’s automated clearinghouse.
The Fed is considering setting overnight balance limits at the lower of $500 million or 10% of the account holder’s total assets, and would not accrue interest on account balances or allow access to clearinghouses that offer same-day and international payments.
Banks raise concerns about access to Fed systems
However, several banking associations have expressed concerns to the Fed about allowing different entities to participate in the central banking system.
The American Bankers Association said many entities that qualify for payment accounts “lack a long-term supervisory track record and may rely on evolving statutory and regulatory regimes rather than being subject to consistent federal safety and soundness standards.”
Related: CFTC expands stablecoin payment standards to include nationwide trust banks
The Wisconsin Bankers Association said it believes account access “should be contingent not only on legal eligibility, but also on a financial institution’s demonstrated competency in governance, risk management, internal controls, and compliance.”
Better Markets, a nonpartisan organization that advocates for financial reform, said the payment account was an “irresponsible and reckless gift to the crypto industry” and should be canceled.
The group said these accounts “tacitly and unnecessarily” expand the Fed’s powers, and the types of companies requesting access to such accounts “pose significant risks to the Federal Reserve and the financial system.”
The Fed will consider feedback before deciding on a final rule on the proposal, which could take several months.
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