- Kraken has been granted a master account with the Fed.
- It is seen as a milestone for the once beleaguered crypto industry.
- Yet, the banking lobby is now hitting back against the decision.
The banking lobby has been left “deeply concerned” after Kraken’s master account request was approved by the Federal Reserve Bank of Kansas City.
The win gives the crypto exchange access to the same payments rail as thousands of banks and credit unions.
“We are deeply concerned that the Federal Reserve Bank of Kansas City has approved an account request for a ‘limited purpose’ master account — which appears to be a ‘skinny’ account — before the Federal Reserve Board has finalised its policy framework for those accounts,” Paige Pidano Paridon, co-head of regulatory affairs at the Bank Policy Institute, said in a statement.
The advocacy group also decried the Federal Reserve Bank of Kansas City’s decision for ignoring public comments, failing to provide transparency and said it “violates the board’s own policy on seeking public comment when it intends to make significant changes to the payments system.”
For Cynthia Lummis, a long-time crypto supporter and Republican senator of Wyoming, the decision marks “a watershed moment.”
Indeed, it comes at a time when the crypto industry and US banks are on a collision course as the former is increasingly getting legal and regulatory recognition, which has enabled it to encroach on what has traditionally been the $23 trillion US lending industry’s turf.
Kraken didn’t immediately return requests for comment.
A ‘milestone’
Kraken celebrated the master account approval on Wednesday, which will enable the crypto exchange to handle transactions faster and more seamlessly for big clients. Arjun Sethi, Co-CEO of Kraken, told DL News in September that the company’s aim is that institutional investors will make up a third of the firm’s revenue.
Even though the firm won’t get access to the full range of services that banks enjoy with the central bank — such as payments of interest on reserves held with the Federal Reserve — it still marks a major win for an industry that has long been treated as the financial industry’s unwanted step-child.
“This milestone marks the convergence of crypto infrastructure and sovereign financial rails,” Sethi said in a statement. “With a Federal Reserve master account, we can operate not as a peripheral participant in the US banking system, but as a directly connected financial institution.”
US President Donald Trump’s pro-crypto policies have legitimised the industry. In his first year back in the Oval Office, the 79-year-old has fired off a barrage of crypto-friendly executive orders, appointed industry allies to key government roles, supported looser policing of the sector, and signed the Genius Act, a landmark stablecoin bill, into law.
The Genius Act did, however, provide a loophole that could enable crypto exchanges to pay customers interest on stablecoin holdings, which the banks have rejected out of fear that it would drive customers away from them.
This week, Trump sided with the crypto industry in its monthslong dispute with banks over stablecoin yield, a row that has threatened to derail negotiations over the Clarity Act, a landmark regulatory framework for cryptocurrencies in the US.
Banks have lobbied lawmakers to include language in the Clarity Act that would close the supposed stablecoin interest loophole. Crypto companies, in turn, have slammed banks for attempting to relitigate components of a bill more than six months after it was signed into law.
Eric Johansson is DL News’ managing editor. Got a tip? Email him at eric@dlnews.com.
