The Federal Reserve on May 20 opened a 60-day public comment period on a proposal to create a new "payment account" — a stripped-down version of the master accounts that traditional banks use to settle directly through the central bank's infrastructure. The proposal arrived one day after Presiden...
"Payments innovation moves fast, and the Federal Reserve needs to keep up." — Christopher Waller, Federal Reserve Governor, Payments Innovation Conference, October 2025
The Federal Reserve on May 20 opened a 60-day public comment period on a proposal to create a new "payment account" — a stripped-down version of the master accounts that traditional banks use to settle directly through the central bank's infrastructure. The proposal arrived one day after President Donald Trump signed Executive Order 14215, "Integrating Financial Technology Innovation into Regulatory Frameworks," which directs every federal financial regulator to review rules that restrict fintech and crypto firms from the payment system and requests the Fed to evaluate expanded access within 120 days.
Together, the two actions represent the most significant structural challenge to bank-exclusive access to U.S. payment rails since the Federal Reserve Act of 1913. For crypto firms — stablecoin issuers, custody providers, and blockchain payment processors — the implication is direct: settlement through Fedwire and FedNow without reliance on intermediary banks. For the approximately 4,000 institutions that currently hold master accounts, the implication is competition they have never faced at the infrastructure layer. The banking industry has responded with immediate opposition, arguing that differentiated regulatory treatment creates systemic risk.
Executive Order 14215, signed May 19, defines "fintech firm" broadly: any non-bank company that uses technology to offer financial products or services, including payment processing, lending, deposit-taking, digital asset services, custodial services, and blockchain-based services. The order contains four operational directives:
1. Regulatory review. All federal financial regulators — the OCC, FDIC, SEC, CFTC, CFPB, and FHFA — must examine existing regulations, guidance, and supervisory practices to identify provisions that are "overly burdensome" or that "favor established financial companies over innovators."
2. Federal Reserve evaluation. The Fed is requested to conduct a "comprehensive evaluation" of the legal, regulatory, and policy framework governing access to Reserve Bank payment accounts by uninsured depository institutions and non-bank financial companies engaged in digital assets. The Fed must submit a report to the President within 120 days.
3. Application transparency. The order directs the Fed to establish transparent application procedures and render decisions on completed applications within 90 days.
4. Authority clarification. The Fed must clarify whether the 12 regional Federal Reserve Banks have independent legal authority to grant or deny payment account access — a question that has produced inconsistent outcomes across districts.
The executive order does not grant immediate access. It initiates a rulemaking process. But the political signal is unmistakable: the White House is pressing the central bank to open the system.
The Fed's response came within 24 hours. On May 20, the Board of Governors published a formal request for public comment on a new account category: the "payment account."
The concept originated in October 2025, when Governor Christopher Waller proposed the idea at the inaugural Payments Innovation Conference. Waller described an account "tailored to the needs of these firms and the risks they present to the Federal Reserve Banks and the payment system" — colloquially, a "skinny master account."
The proposed payment account carries significant restrictions compared to a full master account:
Eligibility is not expanded. Only institutions that already meet existing legal criteria — certain state-chartered banks, trust companies, and special purpose depository institutions — can apply. The proposal does not create a new class of eligible entity; it creates a new product for existing eligible entities.
The 60-day comment period begins upon Federal Register publication. Concurrently, the Fed has directed regional Reserve Banks to pause decisions on pending Tier 3 master account applications through December 31, 2026, to ensure consistent implementation across all 12 districts.
Governor Lisa Cook said she supported sending the proposal out for comment but noted the importance of soliciting public input on "the risks of granting clearing capabilities to firms outside comprehensive federal oversight." Governor Michael Barr opposed the proposal outright, warning that safeguards may be insufficient against money laundering and terrorist financing.
The fight for crypto access to the Fed's payment system has been a five-year legal and regulatory battle.
October 2020: Custodia Bank, a Wyoming-chartered special purpose depository institution founded by Caitlin Long, applies for a master account with the Kansas City Fed. Staff confirm the application contains "no showstoppers."
January 2023: The Kansas City Fed denies Custodia's application, citing concerns about the bank's crypto-focused business model. Custodia sues.
October 2025: A 10th Circuit panel upholds the denial, ruling the Fed has discretion to approve or deny applications from eligible institutions.
March 2026: In an apparent pivot, the Kansas City Fed approves a "limited purpose account" for Payward Financial (Kraken Financial), a Wyoming-chartered special purpose depository institution — making Kraken the first crypto-native firm to gain direct access to Fed payment infrastructure. The account has a one-year initial term with restrictions tailored to Kraken's business model and risk profile.
March 2026: The 10th Circuit denies Custodia's petition for en banc rehearing, voting 7-3. Custodia's five-year legal fight effectively ends. The remaining option — a Supreme Court petition — is a long shot. Alternatively, Custodia could reapply through the new skinny account framework.
The juxtaposition is stark. The same regional Fed that denied Custodia in 2023 approved Kraken three years later, under a novel account classification that appears in neither the Federal Reserve Act nor the Board's Account Access Guidelines. Fed Governor Michelle Bowman described the Kraken approval as a "pilot" for nonbank access to the Fed system, according to American Banker.
Running parallel to the Fed master account fight, the Office of the Comptroller of the Currency has processed an unprecedented wave of national trust bank charter applications from crypto firms.
In December 2025, the OCC conditionally approved five applications: BitGo Bank & Trust, Fidelity Digital Assets, Paxos Trust Company, First National Digital Bank (Circle Internet Group), and Ripple National Trust Bank. Circle and Ripple filed as de novo applicants; BitGo, Fidelity Digital Assets, and Paxos converted from existing state trust companies.
The pace accelerated in early 2026:
In total, eleven companies filed or received conditional approvals in 83 days. The OCC finalized a rule on February 27, effective April 1, clarifying that national trust banks may engage in non-fiduciary custody activities in addition to fiduciary services — a change that expanded the operational scope for crypto custodians.
For firms like Circle and Ripple that obtained OCC trust charters, the Fed's payment account proposal represents the second piece of the puzzle: a federal charter provides regulatory standing, and a payment account provides settlement access. Together, they could form a complete banking-like infrastructure without a traditional bank license.
The traditional banking lobby has responded uniformly. Rob Nichols, President and CEO of the American Bankers Association (ABA), stated that "any player in the financial services marketplace looking to offer bank-like services should be required to meet the same rigorous regulatory and consumer protection requirements. Unless everyone is held to the same high standards, the financial system and consumers will be at risk."
The ABA's core objection: crypto firms accessing Fed rails under lighter regulation creates an uneven playing field. Traditional banks bear the full cost of FDIC insurance, Community Reinvestment Act obligations, capital adequacy requirements, and comprehensive federal supervision. A skinny account holder faces none of these.
The Independent Community Bankers of America (ICBA) raised similar concerns about allowing crypto-focused institutions access to Federal Reserve infrastructure under a regulatory structure different from conventional banks. The Bank Policy Institute (BPI) argued that the Kansas City Fed moved ahead with Kraken's approval before a formal systemwide policy had been finalized — a process the BPI described as inconsistent.
The Colorado Bankers Association, representing more than 126 banks and 20,000 banking professionals, wrote that "master accounts have traditionally been granted to insured and low-risk institutions" and expressed concern about safety measures.
The Blockchain Payment Consortium — founded by the Solana Foundation, Sui Foundation, and others — took the opposite view, calling the proposal "overdue" and arguing that access to central bank settlement systems is essential for implementing the GENIUS Act, the federal stablecoin law.
The economic stakes are significant. Fedwire, the Fed's real-time gross settlement system, processes over $1 quadrillion in annual transaction value. FedNow, the instant payment service launched in 2023, is scaling rapidly. Access to these systems determines who can move money at the infrastructure layer versus who must pay intermediaries for the privilege.
For stablecoin issuers — Circle (USDC), Paxos (USDP, PYUSD), and potential new entrants — direct Fed settlement eliminates the need for correspondent banking relationships that add cost, latency, and counterparty risk. Currently, stablecoin minting and redemption flows route through banking partners. Direct access would compress that chain.
For the $320 billion stablecoin market, already the subject of federal legislation, Fed access could accelerate the shift from crypto-native infrastructure to hybrid rails — stablecoins that settle through the same pipes as dollars, but on blockchain ledgers.
The counterargument from banking incumbents is not trivial. Skinny account holders would access settlement infrastructure without contributing to the deposit insurance fund, without submitting to stress tests, and without the supervisory overhead that backstops systemic stability. The Fed's automated overdraft controls are a mechanical safeguard, not a substitute for prudential supervision.
The 120-day timeline in the executive order suggests an initial report to the President by mid-September 2026. The comment period on the payment account proposal closes approximately mid-July. If the Fed moves to finalize the rule in Q4, the first new payment accounts under the formal framework could be operational in early 2027 — though the Kraken pilot is already live.
The convergence of a presidential executive order and a Federal Reserve rulemaking proposal within 24 hours is not coincidental. It represents a coordinated effort to restructure who can access the plumbing of the U.S. financial system. The policy question is no longer whether crypto firms will connect to the Fed — Kraken already has. The question is on what terms, at what scale, and under what safeguards.
The 60-day comment period will produce predictable battle lines: banks will argue for uniform regulation, crypto firms will argue for proportional access. The outcome will shape whether blockchain-based payment systems operate as walled gardens adjacent to the financial system or as participants within it.
The data points are clear. Eleven OCC charters in 83 days. One master account approved for a crypto firm after five years of denials. A presidential directive with a 120-day clock. A central bank proposal with a $500 million balance cap. The architecture of U.S. payments is being redesigned in real time.