- Kraken secured a Federal Reserve master account on Wednesday, becoming the first crypto bank to gain this direct access.
- Major banking groups called the move risky and a potential violation of the Fed’s own policy process.
- The approval is reportedly a limited “skinny” master account, aligning with a Fed proposal for innovation-focused banks.
- This dispute adds to existing tensions between the banking lobby and the crypto industry over stalled legislation.
On Wednesday, Kraken announced it became the first crypto bank to receive a Federal Reserve master account from the Kansas City Fed, a critical tool for national banking operations. This authorization, which followed years of attempts by crypto firms, immediately triggered a fierce backlash from traditional banking institutions.
However, Kraken‘s approval is reportedly a limited or “skinny” master account that does not allow for interest on reserves. This concept was floated last year by the Fed as a way to potentially fast-track approvals for newer, innovation-focused banks.
Consequently, top banking trade groups denounced the decision as dangerous to the financial system. “There are significant risks to expanding direct Fed account access to institutions that operate outside the traditional banking regulatory framework,” said Rebeca Romero of the Independent Community Bankers of America.
Meanwhile, the Bank Policy Institute, representing Wall Street giants, argued the Fed had violated its own process. It claimed the approval “front-runs” the Fed’s own procedure, as the central bank only formally announced the skinny account framework in late December and the public comment period just ended last month.
The flare-up occurs as the banking lobby and crypto industry remain locked in a feud over stablecoin policy, which has stalled crypto legislation in Congress. On Tuesday evening, President Donald Trump personally waded into the disagreement, siding with crypto leaders according to reports.
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