The US Federal Reserve is considering introducing a new type of payment account that will make it easier for small companies to participate in the central bank’s payment system, signaling the end of access challenges in the crypto industry.
The new floating “payment accounts” will seek to provide full access to fintech companies seeking to use the Fed’s payment services, which are currently reserved for large banks and financial institutions through “Fed Master Accounts.”
“I believe that we can and should do more to support active changes of the payment system,” said Fed Governor Christopher J. Waller during his speech at the Payment Innovation Conference on Tuesday, adding:
“At that point, I asked the Federal Reserve staff to explore the idea of what I called a ‘payment account.’ “
Payment accounts are available for all institutions that are legally eligible for an account that currently perform payment services through a third-party bank.
“Thin” master accounts will provide access to the Fed’s payment rails, while “controlling for various risks in the Federal Reserve and the payment system,” Waller said.
While the idea is in an experimental stage, it indicates a growing effort towards the integration of fintech and crypto payment companies in the traditional financial system (tradfi).
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Industry observers saw the news as a positive development for the crypto industry, as many companies have faced challenges in the past.
During the administration of former US President Joe Biden, at least 30 Tech and Crypto founders were denied access to banking in what some insiders described as an orchestrated effort known as “Operation Chokepoint 2.0.Carrying
“Thank you, Gov Waller, for realizing the terrible mistake the Fed made in blocking payments-only to banks from the Fed Master Accounts, and reopening the access policies that were implemented Postadding:
“The Fed told the courts that such companies would put financial stability at risk by being inherently unsafe and unfounded. Thanks for admitting that’s not true—it’s not true!”
The collapse of crypto-friendly banks in 2023 caused the first allegation of Operation Chokepoint 2.0. Critics, including venture capitalist Nic Carter, described it as a government effort that Banks pressure to cut ties In cryptocurrency companies.
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The Fed is “hands-on” with tokenization, smart contracts, and AI-based payments
The Fed has been experimenting with blockchain technology for payments even before announcing the idea of ”thin” master accounts.
The central bank is exploring both blockchain and artificial intelligence for payment-related cases, Waller said, adding:
“We’re also looking forward, doing hands-on research on tokenization, smart contracts, and the intersection of AI and payments for use in our own payment systems.”
“We are doing this to understand the change that is happening within the payment system as well as to evaluate whether these technologies can provide opportunities to upgrade our own payment infrastructure,” added Waller.
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