The Federal Reserve of the United States announced that it is publishing final guidance for new financial institutions to access its “master accounts.” The global payment system requires these firms to participate. Nikhilesh De, Managing Editor of CoinDesk Global Policy & Regulation, discusses the specifics and potential outcomes.
The announcement appears to move the US central bank one step closer to potentially allowing Wyoming special purpose depository institutions (SPDI) . This includes Custodia (formerly Avanti) and Kraken Bank access to these accounts without the need for intermediary banks. Last year, the Fed issued its first guidance, inviting public comment. Nearly 300 people responded, prompting a second public feedback process earlier this year.
Fed Vice Chair Lael Brainard in a statement, that “The new guidelines provide a consistent and transparent process to evaluate requests for Federal Reserve accounts. And also access to payment services in order to support a safe, inclusive, and innovative payment system.”
The guidance is broadly similar to what was first proposed in 2021. And it will establish a multi-tiered system that will allow the Fed to tailor its evaluation process for granting access . The granting access is based on the type of financial institution applying. Each tier corresponds to a more stringent review procedure.
According to the guidelines, Tier 1 banks would be federally insured. The Tier 2 banks will not be federally insured. But they would be “subject to prudential oversight by a federal banking agency.”
The third tier includes firms that are “not federally insured . Federal banking agency does not subject to prudential supervision.” Most likely it includes Wyoming crypto banks.
The Fed received comments after publishing both its initial proposed guidance in 2021 and its updated guidance earlier this year. According to a statement published alongside the guidance and press release. Most commenters used a template letter, but the Fed only appears to have received about 70 unique responses.
“Many commenters, on the other hand, suggested that the Proposed Guidelines make it more difficult for institutions with new charters to gain access to accounts and services. While the commenters argued that, regardless of the institution’s business model, the Proposed Guidelines should subject non-federally insured institutions to the same types of requirements as federally insured depository institutions .”
Long Journey
Shortly before the publish of Fed’s initial proposal , Custodia and Kraken both applied for master account access in 2021
Kraken Bank CEO David Kinitsky told CoinDesk at the time that the proposal was a positive step for his company.
“There’s nothing novel about the factors they’ve included here.” “This is exactly what the Federal Reserve is looking at in terms of risk to the reserve itself. A risk to the payment system, and risk to the economy,” he said.
Both companies received routing numbers earlier this year, which was an important step toward gaining access to master accounts. Though not indicative that the companies will for sure receive access. Custodia sued the Fed in June, accusing it of failing to meet a mandatory one-year deadline . A deadline deciding whether to grant the Wyoming firm access or not.
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