Banks Block Crypto Firms From Fed's Payment System

Banks have intensified their opposition to granting crypto and fintech companies direct access to the Federal Reserve's payment systems. Key banking industry groups are advocating for a mandatory 12-month waiting period before any new applicants can be considered for payment accounts. They argue that companies issuing stablecoins must demonstrate a history of safe and sound operations before being granted such access.

This dispute centers on the control of essential US payment infrastructure, which has historically been exclusive to banks. Currently, crypto and fintech firms depend on partner banks for critical services like anti-money laundering monitoring and compliance. The proposed direct access would eliminate this reliance, allowing firms to operate more autonomously.

Industry observers suggest that the Fed is likely to proceed with its plan despite these objections. In anticipation of potential new regulations, many fintech and crypto firms have already applied for national trust bank charters, with the explicit goal of securing master account access. However, traditional banks are pushing for stricter eligibility requirements, including limiting access to federally supervised institutions with insured deposits.

Concerns also extend to the specifics of the proposed accounts, with feedback highlighting inflexibility. Issues raised include limitations on accessing payment systems like FedACH, the absence of overdraft privileges, and restrictive overnight balance caps. These proposed limitations could hinder the operational capacity of large-scale payment firms.