The Federal Reserve has opened a portal for public feedback regarding a proposal for fintech firms and crypto companies to access the US central bank’s payment infrastructure on a limited basis, through “skinny accounts.”

According to the proposal released on Friday, the Fed is discussing a concept with policymakers on a new category of payment accounts that will allow certain non-bank financial institutions to settle and clear transactions directly through the Federal Reserve’s systems. 

“These new payment accounts would support innovation while keeping the payments system safe. This request for information is a key first step to ensuring that the Fed is responsive to evolutions in how payments are made,” explained Fed Governor Christopher J. Waller.

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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