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The US Federal Reserve is contemplating the launch of a new category of payment account that would facilitate participation for smaller enterprises in the central bank’s payment network, indicating the conclusion of the crypto sector’s banking accessibility issues.
The proposed “payment accounts” would aim to provide complete access to fintech firms wanting to leverage the Fed’s payment offerings, which are presently allotted to major banks and financial entities via the Fed’s “master accounts.”
“I believe we can and should enhance our support for those who are actively reshaping the payment system,” expressed Fed Governor Christopher J. Waller during his address at the Payments Innovation Conference on Tuesday, further stating:
“To that end, I have instructed Federal Reserve staff to investigate the concept of what I refer to as a ‘payment account.’
The payment accounts would be open to all entities legally qualified for an account that presently conducts payment services via a third-party bank.
The “skinny” master accounts would enable access to the Fed’s payment infrastructure, while “mitigating various risks to the Federal Reserve and the payment system,” Waller remarked.
While the notion is still in a trial phase, it represents an increasing initiative towards integrating fintech and crypto payment companies into the conventional finance (TradFi) framework.
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Industry observers perceived the announcement as a beneficial advancement for the crypto sector, as numerous companies have encountered debanking obstacles in the past.
During the tenure of former US President Joe Biden, at least 30 technology and crypto founders were refused banking access in what some insiders termed a coordinated endeavor known as “Operation Chokepoint 2.0.”
“THANK YOU, Gov Waller, for recognizing the significant error the Fed made in prohibiting payments-only banks from Fed master accounts, and re-opening the access regulations the Fed implemented to exclude @custodiabank,” stated Caitlin Long, the founder and CEO of Custodia Bank, in a Tuesday X post, further adding:
“The Fed informed courts that such firms would jeopardize financial stability by being intrinsically unsafe & unsound. Thank you for acknowledging that this is untrue—it never was true!”
The downfall of crypto-friendly banks in 2023 ignited the first accusations of Operation Chokepoint 2.0. Critics, including venture capitalist Nic Carter, described it as a government initiative to coerce banks into severing connections with cryptocurrency entities.
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Fed is “actively involved” in tokenization, smart contracts, and AI-based payments
The Fed has been testing blockchain technology for payments prior to revealing the concept of the “skinny” master accounts.
The central bank has been investigating both blockchain and artificial intelligence for payment-related applications, stated Waller, adding:
“We are also looking forward, engaging in practical research on tokenization, smart contracts, and the convergence of AI and payments for application in our payment systems.”
“We pursue this to comprehend the innovation taking place within the payment framework as well as to assess whether these technologies could offer opportunities to enhance our payment infrastructures,” concluded Waller.
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