The U.S. Federal Reserve is considering introducing a brand new payment account type that will make it easier for smaller businesses to take part in the central bank's payments system, signaling the top of the crypto industry's banking access challenges.
The newly created “payment accounts” are intended to supply full access to fintech firms that wish to use the Fed’s payment services, that are currently reserved for big banks and financial institutions through the Fed’s “master accounts.”
“I consider we are able to and will do more to support those that are actively transforming the payments system,” Fed Governor Christopher J. Waller said during his speech on the Payments Innovation Conference on Tuesday, adding:
“To that end, I even have asked Federal Reserve staff to explore the concept of what I call a “payments account.”
The payment accounts can be available to all institutions authorized to have an account that currently process payment services through a third-party bank.
The “slim” master accounts would supply access to the Fed’s payment channels while “controlling various risks to the Federal Reserve and the payments system,” Waller said.
Federal Reserve Governor Christopher J. Waller speaks on the Payments Innovation Conference. Source: YouTube
Although the concept continues to be in its experimental stage, it signals growing efforts to integrate fintech and crypto payment firms into the standard economic system (TradFi).
Industry observers viewed the news as a positive development for the crypto industry as many firms have faced debanking challenges up to now.
During former US President Joe Biden's administration, not less than 30 tech and crypto founders were denied banking access in what some insiders described as an orchestrated operation dubbed “Operation Chokepoint 2.0.”
“THANK YOU, Governor Waller, for recognizing the terrible mistake the Fed made in blocking payment-only banks from Fed principal accounts and reopening the access rules the Fed put in place to maintain @custodiabank out,” Custodia Bank founder and CEO Caitlin Long wrote in a Tuesday X post, adding:
“The Fed told the courts that such firms would threaten financial stability because they were inherently uncertain and unsure. Thank you for admitting that's not true – it was never true!”
The collapse of crypto-friendly banks in 2023 sparked the primary allegations of Operation Chokepoint 2.0. Critics, including enterprise capitalist Nic Carter, called it an attempt by the federal government to pressure banks to chop ties with cryptocurrency firms.
The Fed is “hands-on” on tokenization, smart contracts and AI-based payments
The Fed was already experimenting with blockchain technology for payments before announcing the concept of “thin” principal accounts.
The central bank has been exploring each blockchain and artificial intelligence for payments-related use cases, Waller said, adding:
“We are also looking ahead and conducting practical research on tokenization, smart contracts and the intersection between AI and payments to be used in our own payment systems.”
“We do that to grasp the innovations within the payments system and assess whether these technologies could provide opportunities to modernize our own payment infrastructures,” Waller added.
