Written by: Oluwapelumi Adejumo
Compiled by: Luffy, Foresight News
U.S. President Trump has formally pressured the Federal Reserve to re-evaluate the highly controversial access rules within the U.S. financial sector, escalating the industry battle over whether crypto firms and fintech companies can directly connect to the central bank's payment systems.
On May 19, Trump signed an executive order directing the Federal Reserve to assess its policies regarding granting payment account access to nonbank financial companies, including those engaged in digital assets, blockchain services, and other fintech businesses.
Titled "Modernizing the Regulatory Framework to Facilitate Financial Innovation," the order requires major federal regulatory agencies to review existing rules and eliminate redundant regulatory provisions that hinder financial innovation.
This order does not immediately grant crypto firms direct access to Federal Reserve payment channels. However, it explicitly authorizes the Federal Reserve to examine whether existing laws permit broader access and, if so, to clarify the application process.
The outcome of this review is crucial, as it will directly determine whether companies like Kraken, Ripple, Coinbase, Circle, Anchorage, Wise, Paxos, and BitGo can reduce their reliance on intermediary banks and move closer to core U.S. dollar wholesale clearing financial infrastructure.
Policy Shift for Fed Master Account Access
The core focus of this executive order is the Federal Reserve master account. Institutions holding such an account gain direct access to the full suite of Federal Reserve payment services, including the interbank large-dollar U.S. funds transfer system, Fedwire.
Under current Fed rules, such accounts are, in principle, only open to depository banking institutions. Consequently, many crypto firms have had to pursue special-purpose banking charters or national trust bank charters in their quest for direct connection eligibility.
Trump's order now requires the Federal Reserve to comprehensively review the access rules for central bank payment accounts, while also clarifying whether the 12 regional Federal Reserve Banks have the statutory authority to independently approve or reject institution account applications.
In March of this year, the Federal Reserve Bank of Kansas City took the lead by approving a restricted master account for Kraken's parent company, Payward, setting the industry's first precedent and making this issue of access increasingly urgent.
In addition, the order instructs regulators to conduct a comprehensive review of barriers to the development of the fintech industry, covering charter licensing rules, third-party risk management guidance, and policies restricting cross-border collaboration between banks and tech companies.
U.S. Senator Cynthia Lummis stated that this new policy corrects the long-standing restricted access situation for the fintech industry. Traditional legacy financial institutions have monopolized core payment channel resources, while emerging tech companies have long been excluded. This order aims to create a level playing field, stimulate industry vitality, and reduce payment costs for the public.
Coinbase Chief Legal Officer Paul Grewal also expressed support for the move. He argued that current payment access rules and third-party risk control guidelines are outdated, favoring traditional financial giants and suppressing innovation, and that regulatory rules urgently need renewal.
This echoes a common demand within the crypto industry: access to the central bank's core payment network has become a competitive barrier. Firms unable to connect directly must rely on bank intermediaries, which not only increases operational costs and slows settlement efficiency but also imposes the additional operational risks of their partner banks.
Kraken Provides a Feasible Model for Crypto Companies
Kraken has provided a practical example for the industry to expand access. In March, the Kansas City Fed granted a master account to its financial entity, Kraken Financial, allowing access to the core U.S. dollar large-value clearing payment channels. This enables the platform to handle institutional user deposits and withdrawals more efficiently, particularly facilitating rapid transfers of large funds between the trading platform, custodians, and partner banks.
However, this account comes with clear limitations: it does not offer the full range of financial services available to regular insured banks, does not earn interest on reserve balances, and cannot access Federal Reserve credit facilities.
This restricted design can reduce central bank systemic risk while allowing crypto firms moderate access to mainstream payment infrastructure. It is likely to become a universal template promoted by regulators in the future—granting firms U.S. dollar transfer and clearing permissions while strictly prohibiting access to high-sensitivity financial privileges like overdraft lending, reserve interest, and emergency liquidity assistance.
Custodia Bank CEO Caitlin Long welcomed the new policy. Her institution has sought access to the Federal Reserve system for years but was rejected in 2023, with the Fed ruling that its crypto-focused business model did not meet statutory access requirements, highlighting the extreme difficulty licensed crypto institutions previously faced in gaining full access.
The implementation of Kraken's restricted account has fundamentally shifted the regulatory stance. Regulators no longer have only the options of "full access" or "complete rejection." Through a tiered permission model, they can gradually guide crypto firms into the mainstream payment system while firmly maintaining risk control bottom lines.
Ripple, Coinbase, and Circle are Prepared for the Next Phase
Ripple, Coinbase, and Circle are among the most direct beneficiaries of this policy relaxation. Ripple has already applied for a Federal Reserve master account and actively supports implementing a lightweight restricted account mechanism that allows non-bank institutions to conveniently use basic payment services without touching the Fed's core financial privileges.
Once successfully implemented, this would significantly boost its RLUSD stablecoin business, enabling efficient reserve fund transfers and user redemption operations. For stablecoin issuers, the efficiency of reserve clearing and fund redemption stability directly determine market confidence. Direct or restricted access to a Federal Reserve account would greatly reduce reliance on bank intermediaries, allowing more flexible U.S. dollar liquidity management during periods of concentrated redemptions or market volatility.
Coinbase and Circle, through their USDC stablecoin businesses and own payment ecosystems, also have strong needs for access. Both institutions have established federal trust bank structures, which not only further integrate them into the federal unified regulatory system but also pave the way for applying for Federal Reserve payment accounts.
Meanwhile, other companies are also waiting in line. Anchorage Digital is already a federally chartered crypto bank; Paxos, BitGo, and Fidelity Digital Assets have successively obtained national trust bank-related approvals from the Office of the Comptroller of the Currency. While such qualifications do not directly translate into Federal Reserve payment account access, they significantly narrow the gap between these firms and compliance standards.
Industry demands are clear: crypto exchanges seek fast fiat currency settlement, stablecoin issuers want autonomous control over reserve funds, asset custodians aim to optimize institutional client fund flow efficiency, and payment companies are eager to reduce heavy reliance on cross-border clearing banks.
Galaxy Digital Head of Research Alex Thorn stated bluntly that it is not only deposit-taking and lending banking institutions that are qualified to conduct wire transfer business; this is a threshold set by modern regulation, not an immutable rule of the financial industry. With multiple forces now competing, traditional banks are actually fighting to maintain their monopoly in the payments industry. The prevailing industry view is that payment channel access eligibility should be determined based on a firm's business attributes, compliance and regulatory rigor, and risk management capabilities, rather than rigidly adhering to traditional banking business models.
Traditional Banks Warn: Access Must Meet Bank-Level Standards
Facing calls for industry openness, the American Bankers Association has clearly expressed opposition. The association believes that any institution conducting bank-like business must be subject to the same stringent regulatory standards and consumer protection rules as traditional banks.
ABA President and CEO Rob Nichols stated publicly: "Without full industry-wide high-standard regulation, the entire financial system and ordinary consumers will face direct risks. Regarding this White House financial innovation executive order, we urge regulatory agencies to uphold the bottom line of safety and soundness of the financial system while promoting innovation, and not to lower access thresholds."
This is the core concern of the banking industry. Direct access to the Federal Reserve payment system is not merely a business privilege; it comes with a suite of high-intensity regulations, including deposit insurance systems, capital adequacy assessments, liquidity controls, and regular business reviews. From the banks' perspective, allowing crypto firms with lightweight licenses and limited business scopes, which lack equivalent compliance obligations and risk management capabilities, to connect to the core payment network could easily sow the seeds of systemic risk.
The Fedwire system is the core hub for global U.S. dollar clearing. Any cyber-attacks, operational failures, compliance breaches, or liquidity crises at an接入 institution could cause settlement disruptions with impacts far beyond the firm's own business scope. Simultaneously, banks invest heavily in compliance areas such as anti-money laundering, customer fund monitoring, and suspicious transaction reporting. Regulators also need to confirm that crypto firms possess equivalent compliance capabilities before allowing them to engage in diverse businesses like trading, asset custody, stablecoin issuance, and payments.
Liquidity diversion is another key concern for banks. If stablecoin issuers and fintech firms can efficiently hold and transfer funds through the Federal Reserve system, they will likely divert existing funds from the traditional banking system.
The restricted account rules proposed by the Fed, by removing benefits like interest and credit, somewhat alleviate this concern, but the banking industry will not readily acquiesce to this shift in the industry landscape.
Although specialized restricted accounts can avoid most risks through permission demarcation, they also raise new regulatory questions: At what point does the level of payment business access granted to a non-bank institution make its operations equivalent to those of a formal bank? This will become a core point of contention for regulators in defining future access boundaries.
