What Is the Federal Reserve Proposing?
Nearly 30 comment letters were filed by Friday in response to a Federal Reserve proposal that would create a limited form of master account, often referred to as a “skinny” master account. The proposal would give certain eligible institutions restricted access to parts of the US central bank’s payment services, without granting the full privileges that come with a traditional master account.
A master account provides direct access to the Federal Reserve’s payment rails and is considered the most direct link financial institutions can have to the US money supply. Institutions without one typically rely on correspondent banks to clear and settle payments, adding cost, dependency, and counterparty exposure.
As new types of financial firms have emerged, the Fed has argued that a more tailored approach may be needed. Under the proposal, payment accounts would come with clear limits: no interest paid on balances, no access to the discount window, and restrictions on overdrafts. The goal, according to the Fed, is to widen access while containing risk.
Fed Governor Christopher Waller first outlined the concept in October, describing a structure that offers connectivity to payment systems without extending broader central bank support.
Investor Takeaway
Why Crypto Banks Support the Idea but Want Changes
Anchorage Digital Bank, the first federally chartered crypto bank, submitted a comment letter supporting the Federal Reserve’s direction while flagging operational concerns. One issue centers on proposed limits on overnight balances held in the payment account.
The Fed is considering a cap set at “$500 million or 10% of the Payment Account holder’s total assets” for end-of-day balances. Anchorage argued that such limits would undercut the purpose of the account by forcing firms to move client funds back to correspondent banks overnight.
“The proposed cap forces institutions to sweep client funds to correspondent banks overnight, reintroducing the very credit and operational risks the Payment Account is intended to eliminate,” Anchorage wrote. “Such caps also negate the business continuity and disaster recovery value of the Payment Account.”
From the perspective of crypto-focused banks, limited Fed access is meant to reduce reliance on traditional intermediaries. If balance limits require routine offloading of funds, the model risks preserving the same fragilities it aims to remove.
Stablecoin Groups Frame Access as Infrastructure, Not Privilege
Industry groups tied to blockchain payments also backed the proposal, linking it to recent federal legislation. The Blockchain Payment Consortium, founded by several blockchain organizations, described the concept as overdue and tied its support to the GENIUS Act, a new federal law governing stablecoins.
The group argued that access to central bank settlement systems matters for implementing stablecoin rules at scale, particularly where on-chain payments intersect with traditional dollar settlement.
“The GENIUS Act’s passage is proof that stablecoins and blockchains are welcomed innovations to the U.S. payment system,” the consortium wrote. “Now, the Federal Reserve has the opportunity to support this innovation while upholding its mandate to safeguard the payment system.”
This framing treats payment accounts less as a reward for institutional status and more as shared infrastructure needed to operate within the law. That view clashes directly with how many traditional banks see master accounts.
Investor Takeaway
Why Community Banks Are Pushing Back
Community banking groups were far more cautious. The Colorado Bankers Association, which represents more than 126 banks and over 20,000 banking professionals, warned that expanding access could weaken long-standing safeguards.
“Master accounts have traditionally been granted to insured and low-risk institutions,” the association wrote. “Institutions that are insured have significant regulatory oversight and have limitations on what commercial activities are permissible. Limiting Fed account access to low-risk institutions protects the payment system.”
A similar concern was raised by the Community Bankers Association of Illinois, which represents 265 financial institutions across the state. While supportive of innovation in principle, the group argued that newer financial firms do not face the same depth of supervision or historical accountability.
“If Novel FIs are allowed Federal Reserve ‘skinny’ accounts and services, they will not only have an unfair competitive advantage over community banks but will additionally pose a significant risk of harming consumers, the financial system and American taxpayers,” the association said.
At the core of the opposition is a fear that partial access erodes the boundary between insured banking and other financial models, while still leaving the public sector exposed if problems emerge.
What the Comment Split Tells Us About the Payment System
The range of responses reflects a deeper disagreement about how the US payment system should evolve. Crypto banks and blockchain groups see limited Fed access as a way to reduce concentration risk and dependency on a shrinking pool of correspondent banks. Community lenders see it as a dilution of standards built around insurance, supervision, and long-term trust.
The Federal Reserve now faces the task of deciding whether limited access can truly be walled off from broader risk, or whether even a narrow connection to central bank rails carries implications that justify tighter gatekeeping.
Whatever the outcome, the volume and tone of the comments suggest that payment system access is no longer a technical issue. It has become a contested policy question about competition, oversight, and who gets to plug directly into the core of US financial plumbing.
