The U.S Federal Reserve published what it called “final guidelines” for how crypto banks could be granted “master accounts” that are needed to transact directly with the Fed and the broader global banking system.
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Fast facts
- The Fed referred to these firms as “institutions offering new types of financial products or with novel charters,” but it is understood to largely apply to crypto firms looking to transact without an intermediary.
- “The new guidelines provide a consistent and transparent process to evaluate requests for Federal Reserve accounts and access to payment services in order to support a safe, inclusive, and innovative payment system,” said Vice Chair Lael Brainard in a statement.
- Similar to guidance first proposed in 2021, the updated process will create a three-tiered system for the Fed to evaluate applicants based on what type of financial institution is applying.
- Tier 1 would be insured federally; Tier 2 would also be federally insured though “subject to prudential supervision by a federal banking agency”; and Tier 3 firms are “not federally insured and not subject to prudential supervision by a federal banking agency.”
- It is expected this new guidance will streamline the application process for crypto firms like Payward Inc.’s Kraken Exchange and Custodia Bank Inc. — the latter is currently suing the Fed over a 19-month delay to its application for a master account.
- The Fed also recognized the “potential opportunities” cryptocurrency can afford, but stressed institutions must have systems in place to ensure crypto’s volatile nature does not threaten safety or consumer protections.
See related article: What does Lael Brainard’s rise in the US Federal Reserve mean for the crypto industry?