- Federal Reserve proposed payment accounts for crypto and fintech settlement access.
- New framework blocks overdrafts and excludes Fed credit and reserve interest.
- Kraken approval increased debate over crypto access to U.S. payment infrastructure.
The Federal Reserve has proposed a new framework that could allow certain crypto and fintech firms to gain direct access to the U.S. central bank’s payment infrastructure for clearing and settlement activities.
The proposal, announced in a May 20 statement, introduces a new type of account, a “payment account,” designed for legally eligible institutions that are not federally insured banks. The move follows growing demand from digital asset and financial technology firms seeking direct connectivity to Federal Reserve payment rails instead of relying on intermediary banks.
Under the proposal, eligible firms would be able to process payments through Reserve Banks while operating under a narrower set of permissions than traditional depository institutions. The Federal Reserve Board is also requesting public feedback on the framework as it evaluates how non-bank institutions could interact with central bank payment systems.
Fed Plans Restrictions for Payment Account Holders
The proposed structure includes several restrictions intended to limit the Federal Reserve’s financial exposure. Institutions using payment accounts would not receive intraday credit, access to the discount window, or interest on balances held at Reserve Banks.
The framework would also require all transactions to remain fully funded before settlement. Automated controls would block overdrafts, preventing account holders from accessing liquidity protections available to federally insured banks.
According to the proposal, the payment accounts are intended for institutions that hold state or other legal charters, making them eligible, in principle, for Federal Reserve services, even if they are not federally insured. The framework described fintech firms as non-bank companies, including businesses involved in blockchain-based and digital asset-related services.
The Federal Reserve also asked regional Reserve Banks to pause decisions on new Tier 3 account applications through December 2026 while the framework is under review. Most crypto firms currently fall under the Tier 3 classification.
Debate Intensifies Over Crypto Access to Fed Payment Rails
The issue of granting crypto firms access to Federal Reserve payment systems has remained controversial in the banking sector. The debate intensified after the Kansas City Federal Reserve approved a limited-purpose account for Payward, the parent company of crypto exchange Kraken, in March.
The arrangement gave Kraken access to payment rails used for high-value U.S. dollar settlement, allowing the company to support faster institutional deposits and withdrawals. However, the account did not include access to interest on reserves or other central bank lending facilities.
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