Fintechs push Federal Reserve on Payment Account plan that could curb crypto debanking
A coalition of fintech trade groups is lobbying for the Federal Reserve to move forward with the Payment Account prototype that would open up direct payments access for eligible non-bank financial firms.
- Fintech trade groups led by the American Fintech Council are pressing the Federal Reserve to advance its Payment Account prototype that would grant non-banks direct access to core payment systems.
- Bank industry groups warn that the plan could increase financial stability risks by enabling stablecoin issuers and other non-banks to operate outside traditional supervisory safeguards.
Led by the American Fintech Council, a group of fintech trade associations has submitted a comment letter to the Federal Reserve, where it urged the central bank to move forward with plans for granting direct access to its payment systems for eligible non-bank financial institutions.
“A well-designed Payment Account can expand competition and responsible innovation in payments without introducing new risk or undermining the Federal Reserve’s longstanding prudential safeguards,” American Fintech Council CEO Phil Goldfeder said in a Monday statement.
Payment Accounts are the Federal Reserve’s proposed answer to long-standing calls for access to its payments infrastructure by offering limited settlement capabilities without having to extend full banking privileges.
Late last year, the central bank opened up the possibility of limited direct access to its payment systems after a prolonged standoff. Governor Christopher Waller proposed a “skinny” master account model, but with limitations such as balance caps, no interest, and restricted use of final-settlement systems such as Fedwire.
According to the coalition, allowing Payment Accounts would reduce operational friction in the current system, which typically involves relying on sponsor banks for access to core infrastructure, an arrangement that tends to increase costs, introduce counterparty risk, and limit competition.
Banking groups, however, have raised concerns over financial instability and unregulated activity outside of the federal supervisory perimeter. Among their key concerns are stablecoins and other crypto-adjacent models that can mimic deposit-taking without deposit insurance, resolution mechanisms, or consolidated oversight.
There’s no mention of crypto-facing entities explicitly in the Fed’s proposal, but bankers argue that crypto firms, especially stablecoin issuers, are expected to benefit most from the direct settlement pathway.
The Fed’s proposal stems from the ongoing legal battle over access to Fed infrastructure. Crypto facing Custodia Bank has been embroiled in a lengthy legal battle over the Fed denying its application for a master account. Courts, however, have consistently sided with the Fed’s discretion to prioritise systemic risk management.
At a Monday Conference, Waller said the central bank is looking to roll out skinny master accounts by the year’s end. These accounts would offer limited payment access without interest on balances or discount window borrowing.
