Fed Embraces Crypto Innovation with ‘Skinny’ Master Accounts
Background: Fed Signals Support for Crypto Sector
U.S. Federal Reserve Governor Christopher Waller has signaled a marked shift in the central bank’s approach, stating that the Fed will embrace crypto innovation and work to integrate cutting-edge payments technology within the U.S. financial system. Waller made the statements during the opening of the Federal Reserve’s first payments-innovation conference on Tuesday, as reported by CoinDesk.
Waller, a member of the seven-person Fed Board and a potential candidate for the Chair position, said, “My view from the Fed from now on is embrace the disruption, don’t avoid it.” He further asserted, “The Fed intends to be an active part of that revolution.”
The conference was Waller’s initiative, aiming to convene both established payments institutions and new entrants from the crypto industry to facilitate dialogue and collaboration in transforming the payment system.
The Proposal: ‘Skinny’ Master Accounts for Payments Innovators
As part of the Fed’s plan to embrace crypto innovation, Waller introduced the concept of a “payment account,” described as a lighter version of the traditional master accounts that grant financial firms direct access to Federal Reserve payment systems. These so-called ‘skinny’ master accounts would enable new crypto and payments companies to connect with U.S. payment rails while mitigating risk for the Federal Reserve and the broader system.
These new accounts, Waller outlined, might have significant limitations. They may not permit interest payments on balances, daylight overdraft privileges, or borrowing through the Fed’s discount window. Additionally, strict balance caps could be imposed. The proposal is under Federal Reserve staff evaluation with further industry consultation planned. Waller stated, “We can and should do more to support those actively transforming the payment system.”
Waller’s suggestion comes after industry calls for easier access to payment infrastructure, particularly from crypto firms like Ripple. Such access would allow crypto-native companies to interact directly with the central bank’s payment systems, bypassing the need for third-party bank partners.
Market Reaction and Next Steps
The Fed’s announcement has been welcomed as a sign of greater acceptance of crypto innovation from a key policymaker. Waller, who is not the vice chair for supervision and thus cannot dictate policy directly, has nonetheless established himself as a crypto advocate at the central bank.
During the conference, Waller emphasized, “I wanted to send a message that this is a new era for the Federal Reserve in payments.” He noted that the DeFi industry will no longer be seen “with suspicion or scorn,” and called the event “an acknowledgement that distributed ledgers and crypto assets are no longer on the fringes but are increasingly woven into the fabric of the payment and financial system.”
The central bank will continue seeking feedback from industry players, with more details on the ‘skinny’ master account framework expected in the coming months. The move marks a significant step by the Federal Reserve to align its payments ecosystem with rapid advancements in crypto and decentralized finance.
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What’s Next for Fed and Crypto Integration?
The Federal Reserve’s exploration into new, lighter payment accounts reflects ongoing efforts to adapt to technological shifts in finance. Industry stakeholders, particularly from the DeFi and broader crypto sector, are expected to closely monitor and contribute to the policymaking process. The Fed’s willingness to embrace crypto innovation may set a precedent for future financial infrastructure reforms in the U.S.
Sources: CoinDesk
