Central banking access eases for crypto banks
The Federal Reserve has made it easier for progressive financial organizations to access their master accounts and participate in the international monetary system. This appears to be a step towards the US Federal Reserve granting crypto banks direct access to the Fed's funds, eliminating the need for these institutions to work with traditional financial intermediaries.
U.S. Federal Reserve eases access to central banking for crypto banks
The U.S. Federal Reserve announced it would release the final rules governing how alternative financial institutions may gain access to its "master accounts," which are required to participate in the international monetary system.
The Federal Reserve seems to be moving closer to providing Wyoming's special purpose depository institutions (SPDIs) like Custodia (previously Avanti) and Kraken Bank access to these accounts, eliminating the need for intermediate banks. In 2017, the Fed initiated the guidance proposal process by issuing a request for comments.
After almost 300 people commented, the second round of public feedback was held earlier this year. Fed Vice Chair Lael Brainard released a statement in which she said, "The new guidelines establish a consistent and transparent process to consider requests for Federal Reserve accounts and access to payment services to ensure a safe, inclusive, and creative payment system."
The new regulations are essentially in line with proposals from 2021, which will establish a tiered approach that will allow the Fed to tailor its vetting process for providing access based on the type of financial institution making the request. There is a progressively more thorough evaluation procedure at each tier.
The recommendations would make Tier 1 banks eligible for FDIC insurance. "Subject to prudential supervision by a federal banking regulator," but not "federally insured." Companies in the third tier are "not federally insured and nor subject to prudential supervision by a federal banking institution," which describes the Wyoming crypto banks.
The Fed received feedback after issuing its initial proposed guideline in 2021 and its modified the guidance earlier this year, as stated in the press release.
Many comments suggested that the Proposed Guidelines make it more difficult for institutions with unusual charters to open accounts and use services.
Regardless of the institution's operations, many commenters felt that the Proposed Guidelines should hold all financial institutions and crypto banks to the same standards as federally insured depository institutions.
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