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Blockchain payment firm Ripple, voiced endorsement for the notion of a “lean” Federal Reserve (Fed) payments account designed for non-financial organizations via its chief legal officer, Stuart Alderoty. This account could reportedly alleviate apprehensions from conventional banks regarding financial stability and competitive dilemmas.
Ripple Pursues Fed Master Account
In an interview with Reuters, Alderoty characterized the concept as “appealing” and proposed it could offer reassurance to traditional banks concerned about heightened competition from lightly-regulated non-banks.
Ripple had previously requested a Fed master account back in July of this year, which would enable the firm to link directly to the US central bank’s payment framework, eliminating the need for intermediaries.
The Federal Reserve has historically maintained caution regarding granting access to its payment systems to less-regulated entities, partly due to worries from banks related to potential dangers to the financial system.
Nonetheless, in a significant policy shift, Fed Governor Christopher Waller recently indicated that the central bank is contemplating a “lean” master account.
This account would permit organizations to access Fed payment services without providing other essential advantages, such as interest earnings, overdraft facilities, or emergency lending access.
Despite these restrictions, a “lean” account could still enhance Ripple’s capability to swiftly convert reserves into its dollar-linked stablecoin, RLUSD. This direct access to the Fed’s services would simplify transactions and minimize costs associated with depending on bank intermediaries.
Industry Experts Contribute Insights
Alderoty underscored the significance of redeemability, asserting that having access to a master account would provide the most efficient and transparent means to manage US dollar assets and Treasuries.
Waller clarified that the concept remains an early-stage model and is subject to modifications. He remarked that the intended application of such accounts would be restricted, aiming to prevent interference with the traditional banking sector’s operations.
Additionally, he mentioned that these “lean” accounts might grant crypto institutions access to Fed payment pathways on a “streamlined timeline,” though without certain perks like interest on account balances or overdraft options.
However, Wall Street veteran Caitlin Long, who is also the founder and CEO of Custodia, a Wyoming-chartered crypto bank that has long pursued a comprehensive master account, expressed caution regarding the notion of such ideas.
She highlighted that Waller’s announcement specified that the Federal Reserve’s new initiative would apply solely to “legally eligible entities,” emphasizing the importance of the specifics in the execution.
At the time of writing, the firm’s associated cryptocurrency, XRP, was trading at $2.22, indicating considerable losses in accordance with the broader crypto market’s current downturn. Over the last 24 hours and seven days, the altcoin has decreased by 6% and 8% in value, respectively.
Featured image from DALL-E, chart from TradingView.com
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