The US Federal Reserve is contemplating the launch of a new payment account type aimed at enabling smaller companies to engage with the central bank’s payment system, marking a potential resolution to the banking access hurdles faced by the crypto industry.
The proposed “payment accounts” intend to offer comprehensive access to fintech firms aiming to leverage the Fed’s payment services, which are presently limited to larger banks and financial institutions under the Fed’s “master accounts.”
“I believe we can and should do more to support those actively transforming the payment system,” said Fed Governor Christopher J. Waller during his address at the Payments Innovation Conference on Tuesday, adding:
“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 allowed to hold an account that currently utilizes payment services through a third-party bank.
The “skinny” master accounts would enable access to the Fed’s payment infrastructure while “controlling for various risks to the Federal Reserve and the payment system,” Waller stated.
Though this concept is still in an experimental phase, it reflects an increasing commitment to integrating fintech and crypto payment companies within the traditional finance (TradFi) ecosystem.
Related: Bitcoin crash to $104K was ‘flush,’ not crypto cycle ‘failure’
Industry observers viewed this news as a positive advancement for the crypto sector, which has faced significant debanking challenges in the past.
During former US President Joe Biden’s administration, more than 30 tech and crypto founders were denied banking access in what some insiders termed an organized effort known as “Operation Chokepoint 2.0.”
“THANK YOU, Gov Waller, for realizing the terrible mistake the Fed made in blocking payments-only banks from Fed master accounts, and re-opening the access rules the Fed enacted to keep @custodiabank out,” stated Caitlin Long, founder and CEO of Custodia Bank, in a Tuesday X post, further adding:
“The Fed told courts that such firms would put financial stability at risk for being inherently unsafe & unsound. Thank you for admitting that’s not true–it never was true!”
The collapse of banks supportive of crypto in 2023 led to the initial claims of Operation Chokepoint 2.0. Critics, including venture capitalist Nic Carter, characterized it as a governmental push to compel banks to sever ties with cryptocurrency enterprises.
Related: SpaceX moves $257M in Bitcoin, reignites questions over its crypto play
Fed is “hands-on” on tokenization, smart contracts, and AI-based payments
The Fed has been experimenting with blockchain technology for payments even before proposing the notion of the “skinny” master accounts.
The central bank is delving into both blockchain and artificial intelligence for payment-related applications, stated 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 do this to understand the innovation happening within the payment system as well as to evaluate whether these technologies could provide opportunities to upgrade our own payment infrastructures,” Waller concluded.
Magazine: Bitcoin OG Willy Woo has sold most of his Bitcoin — Here’s why
