The Federal Reserve Board on May 20, 2026 requested public comment on a proposal to create a limited-purpose “payment account” that would let legally eligible financial institutions clear and settle payments directly through the central bank, a move that could open Fed rails to crypto firms and fintechs while drawing sharp warnings from the banking industry over liquidity and financial stability risks.
What Direct Settlement Access Could Mean for Crypto Firms
Key Takeaways
- The Fed proposed a new “payment account” allowing eligible institutions to settle payments directly, without access to intraday credit, the discount window, or interest on balances.
- Closing balances would be capped at up to $1 billion per account, with access to Fedwire, FedNow, and National Settlement Service, but not FedACH.
- Banking trade groups warned the plan could increase run risk and disintermediate insured depository institutions.
Direct settlement access means an institution can move and finalize payments on the Federal Reserve’s own payment infrastructure rather than routing through an intermediary bank. Under the Fed’s proposal, payment account holders would use the Fedwire Funds Service, FedNow Service, National Settlement Service, and free-of-payment Fedwire Securities transfers.
The proposal explicitly excludes FedACH. The Board’s memo stated there is no reasonable way to allow FedACH access while effectively eliminating credit risk without disrupting the network.
For crypto-native firms and fintechs, direct access to Fed settlement rails would reduce dependence on banking partners that have historically been reluctant to serve the digital asset sector. Companies that have struggled to maintain stable banking relationships, a pattern visible in recent ETF-related capital flows, could gain more reliable infrastructure for moving funds.
Critically, the proposal does not expand legal eligibility for Fed accounts. Only institutions already legally eligible would qualify. Payment account holders would not earn interest on balances, would have no access to intraday credit or the discount window, and would operate under automated overdraft controls.
Each Reserve Bank would set closing-balance limits based on expected payment activity, with a hard cap of $1 billion.
Why Banks Are Warning About Liquidity Risk
The Clearing House, Bank Policy Institute, and Financial Services Forum issued a joint warning that broader access for lesser-regulated institutions could increase run risk and accelerate disintermediation from insured banks. Their concern centers on deposits migrating away from traditional banks toward institutions with direct Fed access but without the same prudential safeguards.
The banking groups argued that allowing non-bank institutions to settle directly on Fed rails, without equivalent capital and liquidity requirements, changes the funding dynamics of the financial system. During periods of market stress, such as the volatility that has kept the broader crypto market under pressure, deposits could shift rapidly from insured banks to payment-account holders.
Governor Michael Barr dissented from the proposal, stating that it lacks sufficiently specific safeguards against money laundering and terrorist financing by institutions the Federal Reserve does not supervise. His objection highlights a supervisory gap: payment account holders would access Fed infrastructure without being subject to the same examination regime as banks.
These remain warnings and concerns rather than confirmed outcomes. The proposal includes guardrails, including the balance caps, overdraft controls, and exclusion of credit facilities, designed to limit systemic risk.
What the Debate Signals for Crypto Policy and Market Structure
The proposal follows a December 2025 request for information on a prototype “skinny master account.” That earlier version proposed closing-balance caps at the lesser of $500 million or 10% of assets. The shift to Reserve-Bank-set caps of up to $1 billion signals the Fed is moving toward a more flexible framework.
The Board also directed Reserve Banks to temporarily pause Tier 3 access decisions while the policy process runs. The public comment period closes 60 days after Federal Register publication.
For crypto firms seeking operational legitimacy, the proposal represents a potential path to cheaper, faster settlement without bank intermediation. For banks, it raises the prospect of a two-tier system where competitors access the same payment rails under lighter oversight, a concern that has intensified as digital asset markets continue to attract capital despite a Fear & Greed Index reading of 30.
Stakeholders on both sides will watch the comment period closely. The outcome will shape whether crypto and fintech firms can build directly on Fed infrastructure, or whether the banking sector’s risk-based objections will narrow the scope of the final rule.
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Cryptocurrency and digital asset markets carry significant risk. Always do your own research before making decisions.
