Federal Reserve President Christopher Waller on October 21 proposed a new payment account that would give stablecoin issuers and cryptocurrency companies direct access to the Fed’s payment rails without full master account privileges.
The announcement at the Fed’s first Payments Innovation Conference marked a shift from the central bank’s cautious stance toward digital asset companies.
Waller described the concept as a “skinny” master account that provides basic Fedwire and ACH connectivity while removing interest payments, overdraft capabilities, and emergency financing. The new account creates a payment-only door that has the potential to reshape the way stablecoin issuers settle dollar flows.
The account has a balance limit, does not pay interest, does not offer intraday overdrafts and excludes discount window borrowing.
Companies pursuing full master accounts, such as Custodia Bank, Kraken, Ripple, and Anchorage Digital, may benefit from faster approval schedules.
The conference brought together about 100 private sector innovators in what Waller envisioned as a new era in which “the DeFi industry is no longer viewed with suspicion or disdain” and “we discuss the future of payments.”
Narrow banking and stablecoin structure
This payment account brings back narrow banking and separates payments from credit creation.
Stablecoin issuers already operate as de facto narrow banks, holding collateralized reserves and moving funds without loans, but they lack direct access from the Fed and must partner with commercial banks to redeem their tokens.
Waller’s proposal would allow eligible companies to hold reserves directly with the Fed, holding central bank money and backing tokens, eliminating friction between banks and their partners that creates bottlenecks in times of stress.
Direct access from the Fed would make compliant US stablecoins more like narrow money, reducing the risk of a run.
If the Fed has reserves rather than commercial bank deposits, the token becomes a claim against the central bank’s debt, eliminating credit risk.
Caitlin Long, CEO of Custody Bank, said the change corrects “the terrible mistake the Fed made in blocking clearing-only banks from the Fed’s master account.”
Operational improvements and tradeoffs
Redemption flows are more efficient when issuers send and receive payments directly, rather than routing them through partner banks.
This improvement is mechanical, with fewer steps, shorter wait times, and less dependence on bank hours, but becomes important when redemption queues are longer and flows are high.
Issuers can complete both redemptions and initiating transfers into partner accounts on Fed rails, reducing settlement from hours to near real-time and eliminating the risk of partner banks freezing transfers.
Balance limits determine its usefulness for large issuers. Tether holds tens of billions of dollars in reserves. A hard cap may address operational liquidity, but not the entire base, forcing a division of reserves.
The Fed’s goals to control balance sheet exposure and limit credit exposure create a cap that will force issuers to weigh whether to access some of their reserves directly with the Fed or hold them all in commercial banks.
As reported by CoinDesk, Ripple CEO Brad Garlinghouse had argued nearly a week before Waller’s speech that crypto companies that meet bank-level AML and KYC standards should receive bank-level access to infrastructure.
Ripple submitted a master account application in 2025. Direct access to the Fed will allow Ripple to settle the dollar leg of cross-border transactions without using correspondent banks.
This logic applies to exchanges and custodians that rely on banking partners for fiat rails, where a direct connection to the Fed eliminates dependencies and challenges.
BitMEX co-founder Arthur Hayes expressed skepticism.
“Imagine if Tether didn’t have to rely on TradFi Bank for its survival. The Fed is moving to destroy U.S. commercial banks.”
What is of concern is the elimination of intermediaries. If large issuers and payment processors had direct access to the Fed’s rails, they would no longer need commercial banks for basic services, concentrating liquidity at the Fed and eroding the deposit base.
The restrictions Waller outlined, such as no interest, balance limits and overdraft bans, are meant to thread the needle to support payments innovation without making the Fed the primary deposit recipient or taking on nonbank credit risk.
Here are the changes:
Mr. Waller directed Fed officials to gather stakeholder input, but did not say when.
The GENIUS Act, signed in July 2025, established federal stablecoin requirements but did not allow direct federal access.
Waller’s proposal would fill that gap. Companies with pending applications may be able to make decisions more quickly. Banks with payment subsidiaries may be the first to apply, with crypto-native fintechs to follow once the framework is finalized.
This payment account formalizes the entry of cryptocurrencies into the Fed-supervised infrastructure. Once a major issuer obtains a Fed account, the impact on liquidity and settlement quality will be systemic.
Feedback reserves cannot be frozen by commercial banks or exposed to intermediary credit risk, thus compressing settlement risk in times of stress.
Offshore issuers and issuers unwilling to meet the standards of the GENIUS Act will be displaced by US-regulated issuers offering federally backed tokens with structural safety benefits, reducing regulatory arbitrage by consolidating market share among compliant companies.
Waller’s proposal would open the Fed to payments-only transactions with balance caps and tight restrictions, reinstate narrow banking, position compliant stablecoins as a vehicle for central bank support, and create a level playing field while disintermediating some commercial banking services.
This policy shift recognizes that direct payments reduce vulnerabilities, moves digital asset infrastructure from the edge to the core of dollar movement, and supervised the integration of cryptocurrencies into payment systems.
