Leading banking trade organizations criticized the Federal Reserve’s recent decision to grant a highly sought-after master account to the cryptocurrency company Kraken, asserting that this action is not only perilous but also contravenes the Fed’s established policies.
On Wednesday, Kraken revealed that it had successfully obtained a master account from the Federal Reserve Bank of Kansas City. Master accounts enable banks to utilize the Fed’s payment services and are deemed essential for national banking operations. This marks a historic moment as Kraken becomes the first cryptocurrency bank to receive such approval, despite numerous attempts by others over several years.
However, reports indicate that Kraken’s master account comes with certain limitations; for example, it does not permit interest payments on reserves. This aligns with a new concept of a “skinny” master account proposed by the Fed last year aimed at expediting approvals for banks focused on innovation.
Immediately following this approval, traditional banking groups voiced their concerns, warning of significant risks posed to the U.S. economy.
“Expanding direct access to Fed accounts for institutions outside conventional banking regulations presents considerable dangers,” stated Rebeca Romero, CEO of Independent Community Bankers of America. “The Federal Reserve should restrict master account access solely to institutions meeting top-tier standards in financial services.”
The influential Bank Policy Institute (BPI), representing major Wall Street firms like JPMorgan Chase and Goldman Sachs, took an even stronger stance—claiming that granting Kraken a skinny master account so quickly breaches Fed policy guidelines. The central bank had only recently announced its potential offering in late December and had opened it up for public feedback.
BPI pointed out on Wednesday that although public commentary concluded last month, approving Kraken still “front-runs” the process intended for evaluating skinny master accounts—a program they argue has yet to be finalized or sanctioned by the Fed’s board.
This action disregards public input requested by the Federal Reserve regarding this framework and lacks transparency concerning both approval processes and risk mitigation measures addressing significant concerns raised,” said Pidano Paridon, BPI’s co-head of regulatory affairs in an official statement.
This controversy arises amid ongoing tensions between banking lobbyists and crypto advocates over stablecoin incentives—a conflict which has stalled progress on crypto market structure legislation in Congress.
In response to these developments on Tuesday evening, former President Donald Trump entered into this debate by supporting crypto leaders who assert that traditional banks’ worries about stablecoin rewards are effectively holding back critical legislation related to cryptocurrencies.