Why it Matters

In May, the Federal Reserve proposed creating a new, limited type of master account called a "skinny" master account to give crypto and fintech firms faster, more streamlined access to the U.S. payment system. The proposal comes after crypto and fintech firms have applied for master accounts, sometimes experiencing rejection or relatively long waits for approval.

According to a new Congressional Research Services report published August 4, master accounts at the Federal Reserve allow institutions to directly settle payments through the Fed's wholesale payment infrastructure, historically restricted to chartered depository institutions. Nontraditional firms including fintechs and crypto companies have long sought direct Fed access to reduce dependence on bank intermediaries, lower costs, and improve settlement speed.

From December 2022 to May 2026, the Fed's gatekeeping proved formidable: only three Tier 3 applicants received a master account, while roughly half of Tier 3 applicants withdrew or were rejected for master accounts. Custodia, a crypto-focused Wyoming special purpose depository institution (SPDI), sued the Federal Reserve over its rejected master account application, losing its lawsuit and being denied a rehearing in March.

The Big Picture

The proposed skinny master account would provide streamlined approval, typically within 90 days, and direct access to Fed-run payment systems. However, it would not provide interest payments on balances, access to cash, check, or ACH services, or access to the Fed's discount window or intraday credit. The account would have balance limits and would not impose additional anti-money laundering requirements, though the Fed retains discretion to request AML compliance information.

The Federal Reserve granted the crypto firm Kraken, a Wyoming SPDI, a 12-month pilot limited master account in March 2026, before the formal public comment process concluded. The Bank Policy Institute criticized the Fed for this decision, while Fed Vice Chair Michelle Bowman characterized the pilot as an opportunity for the Federal Reserve to test and learn.

Political Stakes

The administration's push for fintech integration runs parallel to Congress's statutory mandate. In the 117th Congress, P.L. 117-263 required the Federal Reserve to publicly disclose institutions that have requested, been rejected for, or been granted master accounts, which the Fed maintains in a public database. On May 19, an Executive Order directed federal financial regulators to streamline application processes for eligible fintech firms seeking regulatory licenses and to review existing regulations that unduly impede fintech firms from entering partnerships with federally regulated institutions.

Direct access to Fed payment infrastructure via skinny master accounts is considered critical to the implementation of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, which would create a regulatory framework for payment stablecoin issuers. The May 19 Executive Order cannot compel the Federal Reserve to adopt specific account policies because the Fed maintains its independence.

The Bottom Line

Congressional concerns have emerged around surveillance risk regarding whether granting fintech and crypto firms direct access to Fed systems could create new vectors for government monitoring of financial transactions. As of May 31, 357 institutions without federal deposit insurance currently hold master accounts, representing 4% of all master account holders, mostly foreign banks or state credit unions.

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