Banks Seek To Block Kraken’s Fed Approval, Label Crypto A ‘Potential Risk’

bitcoinistОпубліковано о 2026-03-05Востаннє оновлено о 2026-03-05

Анотація

Major US banking groups are opposing the Federal Reserve's decision to grant Kraken Financial, the crypto exchange's banking arm, a master account—the first ever given to a digital asset institution. While this "skinny" account allows Kraken to hold reserves and settle transactions in central bank money, it does not grant full banking powers like lending. Banking associations, including the ICBA, argue the approval was granted without proper public comment and that crypto poses a risk to financial stability. The move intensifies the existing legislative battle between banks and the crypto industry over stablecoin regulations and market structure bills, despite former President Trump's public support for crypto.

The Federal Reserve’s (Fed) decision this Wednesday to grant its first-ever master account to a crypto-focused institution has triggered swift opposition from major banking groups, intensifying tensions between traditional finance and the digital asset sector at a pivotal moment for US crypto legislation.

Opposition From US Banking Groups

Kraken Financial, the Wyoming-chartered banking arm of the exchange, announced that it had secured a Federal Reserve master account—becoming the first digital asset bank in American history to gain direct access to the central bank’s payment infrastructure.

However, the account comes with limitations. Under the so-called “skinny” master account framework outlined by Federal Reserve Governor Christopher Waller, Kraken is permitted to hold reserves and settle transactions in central bank money.

At the same time, it does not receive full banking authority. The firm cannot issue loans, tap into the Fed’s discount window, or function as a conventional commercial bank. In essence, it gains access to payment systems without the broader powers afforded to insured depository institutions.

Even with those restrictions, the move has drawn sharp criticism from the traditional banking industry. The backlash arrives as banks are already engaged in a broader fight over crypto-related legislation.

Industry groups have been pushing to remove the stablecoin rewards provision from the GENIUS Act—legislation that was signed into law by President Donald Trump last year.

That dispute has contributed to delays surrounding the passage of the wider crypto market structure bill known as the CLARITY Act. Now, leading US banking associations are publicly opposing the Federal Reserve’s approval of Kraken’s master account.

Alleged Risks In Expanding Crypto Access

According to Eleanor Terrett from Crypto In America, banking lobbyists argue that the Kansas City Federal Reserve “violated policy” by approving Kraken’s application without going through the customary public comment process.

The Independent Community Bankers of America (ICBA) has expressed strong objections, stating it is “very concerned” about granting crypto firms access to master accounts because it views the sector as a potential risk to financial stability.

Meanwhile, the Bank Policy Institute has accused the Kansas City Fed of effectively front-running the Federal Board’s public comment period and failing to follow established procedures when implementing what they characterize as a significant change to the US payments system.

In their view, granting nonbank entities and crypto institutions access to master accounts—historically limited to highly regulated, insured banks—introduces new vulnerabilities.

At the same time, President Trump has entered the debate. Addressing the legislative impasse surrounding the CLARITY Act, also known as the crypto market structure bill, Trump posted on Truth Social, expressing clear support for the crypto industry in its ongoing dispute with banks over stablecoin yield provisions.

He urged Congress to move swiftly in passing comprehensive crypto market structure legislation. Despite the President’s backing, banking groups remain unconvinced.

According to a banking source involved in negotiations who spoke to Crypto In America, concerns persist that “ambiguous legislative language” could enable crypto companies to bypass a prior agreement not to offer interest or yield on idle stablecoin balances.

“We want to continue negotiating, and what we’re trying to do is defend the agreement in-principle of no interest on balances, making sure no holes are punched in that,” the source said, adding that banks had sent proposed legislative revisions to the White House several days earlier but had not yet received a response.

The daily chart shows the total digital asset market cap at $2.45 trillion. Source: TOTAL on TradingView.com

Featured image from OpenArt, chart from TradingView.com

Пов'язані питання

QWhat is the significance of the Federal Reserve granting Kraken Financial a master account?

AIt marks the first time a crypto-focused institution has been granted direct access to the Federal Reserve's payment infrastructure, allowing it to hold reserves and settle transactions in central bank money.

QWhat are the main limitations of the 'skinny' master account granted to Kraken?

AKraken cannot issue loans, access the Fed's discount window, or function as a conventional commercial bank. It gains payment system access without the full powers of an insured depository institution.

QWhy are major US banking groups opposing the Federal Reserve's approval of Kraken's master account?

ABanking groups argue the Kansas City Fed violated policy by approving it without a public comment process and view crypto sector access as a potential risk to financial stability.

QHow has former President Donald Trump intervened in the crypto legislation debate mentioned in the article?

ATrump posted on Truth Social expressing clear support for the crypto industry in its dispute with banks over stablecoin provisions and urged Congress to pass comprehensive crypto market structure legislation.

QWhat specific concern do banking lobbyists have regarding stablecoin legislation according to the article?

AThey are concerned that 'ambiguous legislative language' could allow crypto companies to bypass a prior agreement not to offer interest or yield on idle stablecoin balances, potentially undermining the banking sector.

Пов'язані матеріали

The Value Distribution of Stablecoins

**Summary: The Value Distribution of Stablecoins** The article argues that stablecoins are evolving from mere trading tools into broader channels for dollar access. It divides the stablecoin ecosystem into four layers to analyze how value is distributed: 1. **Issuance Layer:** Mints stablecoins, holds reserve assets, and captures the spread between reserve yield and user costs (e.g., Tether, Circle). This layer currently earns the largest profit margin. 2. **Infrastructure Layer:** Connects stablecoins to the traditional financial system, handling fiat on/off-ramps, banking integration, compliance (KYC/AML), and asset management (e.g., Bridge, BVNK). This is the "unglamorous" but critical work, building the essential bridges between crypto and real-world finance. 3. **Acquiring/Distribution Layer:** Integrates stablecoins into merchant systems, manages payment flows, and provides enterprise financial software (e.g., Stripe, Coinbase). They act as the access point for businesses. 4. **Application Layer:** The end-users and businesses that ultimately use stablecoins for payments, settlements, or as a store of value. They benefit from convenience but have little pricing power. The core thesis is that while the issuance layer currently dominates profits, the often-overlooked **infrastructure layer holds significant long-term potential**. The real challenge and barrier to mass adoption is not the on-chain transfer of stablecoins (which is simple), but the complex "last mile" integration into existing business workflows, banking systems, and regulatory frameworks across different countries. Companies in this layer are currently in a "land grab" phase, investing heavily to build networks, secure bank partnerships, and establish compliance pathways. While their position is currently pressured by the profitable issuers above and distribution platforms below, the article suggests that if stablecoins become a default financial rail for businesses, the infrastructure providers who have done the hard work of integration will ultimately gain strong pricing power and become entrenched, essential players.

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The Value Distribution of Stablecoins

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The Value Distribution of Stablecoins

The Value Distribution of Stablecoins The article argues that stablecoins are evolving from a mere trading tool into a broad "dollar channel." It analyzes the industry's value chain through four layers: 1. **Issuance Layer (e.g., Tether, Circle):** The top layer that mints stablecoins, holds reserve assets, and captures the thickest interest rate spread. 2. **Infrastructure Layer (e.g., Bridge, BVNK):** Connects stablecoins to the traditional financial system, handling critical but complex "dirty work" like fiat on/off-ramps, banking integration, compliance (KYC/AML), and cross-border settlement. 3. **Acquiring/Distribution Layer (e.g., Stripe, Coinbase):** Embeds stablecoins into merchant systems, manages payment flows, and integrates with enterprise software. 4. **Application Layer:** End-users and businesses that ultimately use stablecoins for payments, settlement, or storing value. The author posits that while the issuance layer currently captures the most profit, the most overlooked and potentially critical layer is infrastructure. The core challenge for stablecoin adoption isn't the on-chain transfer (which is simple), but bridging the gap between blockchain and the real-world financial system. This involves solving practical problems for businesses: fiat conversion, reconciliation, tax handling, and user onboarding. Infrastructure companies are currently in a difficult "land-grab" phase—building networks, securing banking relationships, and achieving compliance country-by-country. They face pressure from both the profitable issuance layer above and distribution platforms below. However, the author suggests this layer is building a crucial moat. Once stablecoins become a default business rail, the infrastructure players who have done the hard work of integration may gain significant, durable value and pricing power.

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The Value Distribution of Stablecoins

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