Crypto banks can now request “master accounts” to conduct transactions directly with the Fed and the broader global banking system following the publication of “final guidelines” by the U.S. Federal Reserve.
- Essentially, it relates to crypto firms seeking to transact without an intermediary as the Fed describes them as “institutions offering new types of financial products.”
- “As a result of the new guidelines,” said Lael Brainard, Vice Chair of the Federal Reserve Board, “applications for Federal Reserve accounts and access to payment services can be evaluated consistently and transparently to ensure a safe, inclusive, and innovative payment system.”
- The updated process, similar to the guidance first proposed in 2021, will establish a three-tiered system for the Fed to evaluate applicants based on the type of financial institution applying.
- Tier 1 firms would be federally insured; Tier 2 firms would be federally insured but “subject to prudential supervision by a federal banking agency,” and Tier 3 firms would be”not federally insured and not prudentially supervised by a federal banking agency.”
- This new guidance is expected to simplify the application process for crypto firms such as Payward Inc.’s Kraken Exchange and Custodia Bank Inc., which is currently suing the Fed over a 19-month delay in its application for a master account.