The Federal Reserve has taken another step toward a special limited payments account that would offer its established banks a simplified version of the central bank’s master account services, opening a comment period on an updated description of the new account.
Companies with multiple business models can use such accounts to clear and settle payments to increase speed and reduce costs, but without master account status, the Fed explained in Wednesday’s statement. The central bank, which oversees and regulates its member banks, issued an information request in December to start developing the concept, with an initial 45-day comment period, and the approach is “broadly similar to the prototype outlined in the work”.
Gaining greater access to the Fed’s payment channels has been an important goal for the cryptocurrency industry, with early proposals from the Fed often referred to as “skinny” accounts.
“Payment account holders would not have access to intraday credit or discount windows or earn interest on balances held by the Reserve Bank, and would only be able to use payment services with automatic controls to prevent overdrafts,” the Fed said in a statement on its new proposal, which will be subject to a 60-day comment period.
But in response to comments made to the Fed since December, the Fed did overhaul some of its thinking, noting that “ending balance limits will be based on an agency’s expected payments activity, and ending balance caps will increase.”
In March, Kraken became the first cryptocurrency bank to gain access to a limited master account, although that access was granted by the Federal Reserve Bank of Kansas City and not under federal rules from the Federal Reserve Board in Washington. The Fed said it is now asking regional banks to pause consideration of certain applications while the rule is completed.
Just a day earlier, President Donald Trump issued a related executive order asking the Federal Reserve to review how it grants access to payment accounts and services to uninsured depository institutions and non-bank financial companies. The order also calls for a review of 12 regional Fed banks that have payment accounts independent of the board.