The US Federal Reserve is exploring the potential introduction of a new category of payment accounts aimed at simplifying access for smaller businesses to participate in its payment system, indicating a shift in challenges faced by the crypto industry regarding banking access.
The proposed “payment accounts” would allow fintech firms to fully utilize the Fed’s payment services, which are presently limited to large banks and financial entities via the Fed’s “master accounts.”
“I believe we can and should do more to support those actively transforming the payment system,” stated Fed Governor Christopher J. Waller during his address at the Payments Innovation Conference on Tuesday, further noting:
“To that end, I have asked Federal Reserve staff to explore the idea of what I am calling a ‘payment account.’”
The payment accounts would be accessible to all institutions legally eligible for an account that currently processes payment services through a third-party bank.
The “skinny” master accounts would offer access to the Fed’s payment systems, while “controlling for various risks to the Federal Reserve and the payment system,” according to Waller.
Although still at an experimental phase, this initiative reflects a growing commitment to integrating fintech and crypto payment companies within the traditional finance (TradFi) framework.
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Observers viewed this announcement as a positive step for the crypto sector, as numerous companies have previously encountered debanking issues.
During the administration of former US President Joe Biden, over 30 technology and crypto founders were denied banking access in what some insiders dubbed an orchestrated initiative known as “Operation Chokepoint 2.0.”
“THANK YOU, Gov Waller, for recognizing the significant error the Fed made in restricting payments-only banks from Fed master accounts and for revising the access rules that kept @custodiabank excluded,” wrote Caitlin Long, founder and CEO of Custodia Bank, in a Tuesday X post, adding:
“The Fed informed courts that such institutions would jeopardize financial stability due to being inherently unsafe & unsound. Thank you for acknowledging that this was never the case!”
The collapse of crypto-friendly banks in 2023 incited early allegations of Operation Chokepoint 2.0. Detractors, including venture capitalist Nic Carter, claimed it was a governmental push to pressure banks into severing ties with crypto entities.
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Fed takes an active role in tokenization, smart contracts, and AI-enabled payments
The Fed has been actively experimenting with blockchain technology for payments even prior to unveiling the concept of “skinny” master accounts.
The central bank has been investigating both blockchain and artificial intelligence for payment-related applications, as noted by Waller, who added:
“We are also looking ahead, conducting hands-on research on tokenization, smart contracts, and the intersection of AI and payments for use in our own payment systems.”
“We conduct this research to comprehend the innovation occurring within the payment system and to assess whether these technologies could modernize our own payment infrastructure,” Waller further explained.
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