You never see the most important part of any of your payments. When an app says your money moved, a number changes on your screen, and the transaction looks and feels finished.
But underneath those interfaces lies a separate, invisible chain of bank reserves, settlement accounts, and Fed infrastructure that determines when your funds actually clear, who controls that settlement, and which institutions are allowed to participate in it at all.
For crypto payments, that underlying system has been off-limits. Exchanges and crypto companies have had to route all of their dollar payments through partner banks, which handled the actual settlement with the Federal Reserve on their behalf. When those relationships collapsed during the failures of Silvergate and Signature Bank in 2023, they revealed just how fragile that relationship was, and the industry has been building the case for direct Fed access ever since.
Two converging developments this week have brought that case to a head. In December 2025, the Fed formally requested public comment on a new “payment account” that would let eligible non-bank institutions clear and settle payments through Fed infrastructure, without receiving the full package of privileges available to traditional bank master accounts.
Then, on May 19, President Trump signed an executive order titled “Integrating Financial Technology Innovation Into Regulatory Frameworks,” directing the Fed to submit a comprehensive review of its payment access framework within 120 days and establish transparent application procedures within 90. The executive order can’t compel the Fed to act, but political backing at that level tends to clarify which way institutional attention is pointing.
Kraken provided the first real-world data point back in March. The Federal Reserve Bank of Kansas City approved a limited-purpose master account for Kraken Financial, the exchange’s Wyoming-chartered banking subsidiary, on March 4, making it the first crypto company in the US to gain direct access to the Fed’s core payment system after more than five years of regulatory engagement.
The account connects Kraken Financial directly to Fedwire, the real-time gross settlement network that processes trillions of dollars in transfers daily, cutting out the intermediary banks that previously handled dollar settlement on Kraken’s behalf.
It’s a limited arrangement, though: the exchange earns no interest on reserves and has no access to the discount window or intraday Fed credit. What it gained is settlement independence from the correspondent banking system, and for a company handling large institutional volumes, that’s a huge structural shift.
Ripple, which has applied for its own Fed master account and supports a restricted account structure for its RLUSD stablecoin, is among the most obvious next-in-line beneficiaries. Circle, whose USDC reserve management depends heavily on dollar settlement speed, has similarly strong business reasons to want direct access.
Kraken’s approval is now a live test case, and companies across the payments and stablecoin space are watching how the experiment develops before deciding how hard to push for their own applications.
What will the Fed’s proposed account actually do?
The payment account the Fed proposed in December is structurally different from a full master account. A full master account lets a regulated depository institution hold balances at the Fed, earn interest on those reserves, access intraday credit, and borrow from the discount window during periods of liquidity stress.
The proposed payment account removes all of that. Eligible institutions could settle through Fedwire, FedNow, and the National Settlement Service, hold limited reserve balances, and process payments across Fed infrastructure, but the Fed has been precise that the new account type wouldn’t expand or otherwise change legal eligibility for its services. Most applicants would still need to qualify under existing criteria, and balance caps would apply.
Crypto and fintech companies would still see practical benefits. Exchanges and stablecoin issuers currently depend on banking intermediaries for dollar settlement, which concentrates operational risk. When a bank partner faces regulatory trouble or withdraws from crypto clients, the effects can reach multiple platforms simultaneously.
Direct access to Fed settlement infrastructure reduces that exposure and gives companies tighter control over their dollar liquidity during high-volume periods. For stablecoin issuers specifically, the ability to move reserves quickly and predictably during heavy redemption periods could be the difference between an orderly market and a disorderly one.
Fed Governor Christopher Waller said that a streamlined payment account should be operational by late 2026, suggesting the central bank sees this as a near-term deliverable rather than a long-run aspiration.
Why are banks fighting the Fed, and what are they actually worried about?
The banking industry’s opposition to the payment account framework has been pretty loud and organized. It’s also worth examining carefully, because it mixes legitimate risk concerns with what can only be described as competitive anxiety.
The Bank Policy Institute, backed by JPMorgan, Bank of America, and other major institutions, has argued that even limited direct access to Fedwire for crypto and fintech firms could threaten financial stability and create money-laundering vulnerabilities.
Fed Governor Michael Barr dissented from the December proposal on illicit finance grounds, saying it lacked adequate safeguards. Kraken’s master account drew immediate criticism from banking trade groups, who said the Kansas City Fed’s approval lacked transparency around the risk controls imposed.
Some of those arguments hold up. Non-bank institutions operating on Fedwire would do so under a different supervisory framework than insured banks, and AML compliance at crypto and fintech companies has historically been less scrutinized. Potential issues with liquidity are worth taking seriously, too: if funds migrate faster out of insured bank deposits and into non-bank platforms with direct settlement access, deposit flows become more volatile. An operational failure at a connected non-bank institution during a period of market stress could generate settlement disruptions that propagate far beyond that company.
The competitive dimension is somewhat less openly discussed. Exchanges and other crypto platforms currently pay banks for the correspondent banking access they need to operate in dollars, and direct Fed settlement would restructure that arrangement, bringing settlement independence to the companies that were previously paying for it. For the large institutions backing the opposition campaign, the risk of losing that intermediation business is probably at least as motivating as the risk of systemic disruption.
The Fed’s design tries to thread the difference: narrow accounts, no backstops, no functional equivalence with insured banks, and eligibility requirements that most applicants won’t satisfy automatically.
Whether that structure holds under simultaneous pressure from crypto firms pushing for more and banking groups pushing for none is genuinely open. Kraken’s limited-purpose account is still a live experiment, the December comment period is ongoing, and Trump’s executive order is less than a week old.
For the first time, the argument about who gets to settle dollars inside the Federal Reserve system is being tested in practice rather than debated in theory.
