The Fed Has Revealed Rules For Crypto Banks Eyeing “Master Accounts”

The Fed has revealed rules for crypto banks who are looking to open so-called “Master Accounts” in order to standardize applications for these types of accounts, from organizations with unique charters (such as cryptocurrency custody banks and related trade associations).

The Fed Has Revealed Rules – Plenty of Leeway Given

The Federal Reserve (Fed)’s governing board has released these guidelines.

Reserve bank master accounts help institutions get direct access to the Fed’s payment systems. Without this access, businesses are forced to collaborate with partner banks that hold master accounts. Many US-based crypto custodial banks have been promoting direct master bank access for a number of years and seem eager to do away with the necessity for intermediate arrangements with traditional banks.

The updated regulations do not have the force of law, but they do seem to give master account access-seeking crypto players plenty of leeway.

The phrase “cryptocurrency custody banks and their trade associations” was the sole direct mention of crypto in the whole treaty. However, the Fed’s statement that its board does not consider that it is appropriate to categorically ban all new charters from access to accounts and services may give the American crypto community cause for optimism.

Not A Straightforward Procedure

However, for crypto companies, obtaining master account access is not going to be a straightforward procedure. Reserve banks must integrate to the degree practicable the “assessments of an institution by state and/or federal supervisors” to their own “independent assessment” of an applicant’s “risk profile,” according to the rules.

The Fed further asserted that under the new regulations, organizations with unique charters would be subject to higher levels of due diligence and scrutiny and a more thorough assessment than trade businesses.

For this new industry, the Fed stated that authorities are currently creating adequate supervisory and regulatory frameworks.

The rules would enable reserve banks to review requests for Federal Reserve accounts and access to payment services in order to promote a secure, inclusive, and creative payment system, the Fed stated in a news statement.

Not Everyone Is Pleased

And it seems that not everyone is pleased that master account access was extended to crypto custodial banks. The Fed asserted that several respondents had pointed to ‘fintech’-related business models and other innovative special purpose charters as posing a heightened risk to the payment system and financial markets throughout the period of public comment on its proposed guidelines.

Michelle Bowman, the governor of the Federal Reserve, added some cautionary remarks in a statement she made on the subject. Although the standards will promote transparency and uniformity, Bowman emphasized that they were just the first step in establishing a transparent process.

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