Federal Reserve to finalize guidelines on crypto access to master account

US Federal Reserve System Said On August 15, it revealed that it plans to publish guidelines for cryptocurrency companies to access the Fed’s master accounts and payment services.

Master accounts allow financial institutions to become part of the global payment system without intermediary banks.

According to a press statement, the regulator said there has been a recent growth in institutions offering new types of financial products, many requiring access to master accounts. The regulator will review these requests and issue new guidelines to ensure transparent and consistent decisions, he added.

Vice-Chairman Lael Brainerd said:

The new guidelines provide a consistent and transparent process for evaluating requests for access to Federal Reserve accounts and payment services to support a secure, inclusive and innovative payments system.

The guidance proposal will begin in 2021 and the Fed has received nearly 300 public comments.

How Guidance Works

According to a press release, the Federal Reserve can change the evaluation process for applicant financial institutions depending on their level of risk.

curious to hear what @GeorgeSelgin, @manmohanDCsinghWhen @David Buckworth Consider this new step-by-step framework for granting Fed master accounts. https://t.co/0cje7Bq0rm pic.twitter.com/rb01ITYzMj

Matthew Pines (@matthew_pines) August 15, 2022

Tier 1 banks are federally insured institutions, while Tier 2 banks are not federally insured but are “subject to sound supervision by federal banking agencies.”

The criteria for judging the first two tiers are not the same as Tier 3 companies. These include companies “engaging in new activities and for which authorities are still developing an appropriate supervisory and regulatory framework.”

The press release states that the final guidelines will ensure that nonfederal insurance agencies licensed under state and federal law have similar review processes based on public comment.

Custodia sues the Fed, accusing it of delaying its response

Wyoming-based cryptocurrency company Custodia sued The Federal Reserve has filed for a delay in responding to its master account application in June.

According to Custodia, the Fed has adopted procedures that allow it to “act in complete secrecy whenever and however it chooses.”

The Fed’s response to the lawsuit is scheduled for August 16th.

Kraken also requested access to the Fed’s master account. Crypto exchanges and Custodia got their routing numbers this year.