Fed proposes Fedwire access for crypto firms; banks flag risks

The Federal Reserve proposed a new “payment account” that would let eligible non-bank firms clear and settle payments on Fedwire, the FedNow instant‑payment service and the National Settlement Service. The Fed asked for public comment in December 2025 and said the account would not include interest on reserves, intraday credit or access to the discount window. The proposal would include balance caps and eligibility limits.

On March 4, the Federal Reserve Bank of Kansas City approved a limited‑purpose master account for Kraken Financial, the exchange’s Wyoming‑chartered banking unit. The account connects Kraken Financial directly to Fedwire, allowing the firm to settle dollar transfers without routing them through partner banks. The approval excludes interest on reserves and emergency credit facilities.

President Trump on May 19 signed an executive order directing the Fed to review its payment access rules within 120 days and to set transparent application procedures within 90 days. The order does not require the Fed to approve new account types, but it sets deadlines for the agency’s review and application process.

Crypto exchanges and stablecoin issuers have expressed interest in direct Fed settlement. Ripple has applied for a Fed master account and proposed a restricted account structure for its RLUSD stablecoin. Circle, the issuer of USDC, has cited operational reasons for seeking faster, more predictable dollar settlement during heavy redemptions. Industry participants say they are watching Kraken’s account as a test case before filing further applications.

Banking trade groups have opposed broader Fed access for non‑banks. The Bank Policy Institute, backed by large banks including JPMorgan Chase and Bank of America, argued expanded access could threaten financial stability and create windows for money‑laundering. In a dissenting statement, Fed Governor Michael Barr wrote the December proposal “lacked adequate safeguards” on illicit finance. Trade groups criticized the Kansas City Fed’s approval of Kraken for what they called a lack of transparency about imposed risk controls.

Regulators have identified specific risks. Anti‑money‑laundering compliance at some crypto and fintech firms has been less rigorous than at insured banks, and non‑bank firms on Fedwire would operate under different supervisory frameworks. Faster settlement from non‑bank platforms could make deposit flows more volatile if large sums move out of insured bank accounts during stress. An operational failure at a connected non‑bank operator could cause settlement disruptions that spread across the system.

The Fed’s proposal seeks to limit those risks by narrowing account features: no Fed backstops such as the discount window, no interest on reserve balances, balance caps and eligibility criteria intended to distinguish the accounts from full master accounts held by insured depository institutions. Fed Governor Christopher Waller estimated a streamlined payment account could be operational by late 2026.

The December comment period remains open, Kraken’s account continues as an early example, and the executive order sets formal review deadlines. The Fed’s final decision will determine whether a broader set of crypto and fintech firms can settle dollars directly at the Federal Reserve or whether correspondent banks will continue to handle most dollar settlement.