Speaking at the Fed’s first-ever Payments Innovation Conference, Federal Reserve Chairman Christopher Waller said the central bank must «embrace change» in the face of digital assets and decentralized finance.
Waller proposed creating a «lightweight» or limited version of the Fed’s main account that could give cryptocurrency and fintech companies direct, albeit limited, access to US payment systems.
The proposed accounts will differ from traditional master accounts in several ways. They will not accrue interest, offer intraday overdrafts, or borrow through the Federal Reserve’s discount window. Instead, they will provide limited access with a limited balance.
Historically, only federally licensed banks were granted access to master accounts, which allow direct settlements with the central bank. Non-banking institutions were subject to rigorous scrutiny. Under the Federal Reserve’s current three-tier system, the highest-risk institutions, such as crypto companies, will be subject to the most stringent scrutiny.
Waller’s proposal represents a departure from this concept, ostensibly allowing the Fed to evolve to maintain competitiveness.
For fintech companies and stablecoin issuers, a «payment account» could bridge the gap between innovation and regulation, providing limited but important access to the US financial core.