Fed seeks public input on new payment accounts for nonbank firms after Trump directive

The Federal Reserve Board is seeking public comment on a proposal to create a new category of account, called a “payment account,” that would allow legally eligible financial institutions to clear and settle payments through the central bank’s infrastructure, according to a May 20 statement.

The proposal responds to growing demand from firms outside the traditional banking system that want direct access to Fed payment rails.

The proposal targets institutions that are not federally insured but hold state or other legal charters that make them eligible, in principle, for Federal Reserve services. Under the plan, these entities could open accounts at Reserve Banks solely for processing payments, a narrower function than the full suite of services available to conventional depository institutions.

Key restrictions built into the design

Payment account holders would face several constraints meant to limit the Federal Reserve’s risk exposure. They would receive no intraday credit, no access to the discount window, and no interest on balances held at a Reserve Bank.

Automated controls would block overdrafts, ensuring that every transaction is fully funded before it settles. The design strips away the safety-net features that federally insured banks receive while still granting a direct connection to the Fed’s clearing and settlement systems.

The Board stressed that the proposal does not expand or change the legal criteria governing who may request Fed accounts and services. Reserve Banks would continue to evaluate access requests individually, and institutions approved for payment accounts would be expected to maintain strong anti-money-laundering and illicit-finance controls.

Evolution from the December 2025 request for information

The framework builds on a prototype the Board outlined in a request for information issued in December 2025. That earlier document invited feedback on the concept, and the revised proposal incorporates several adjustments based on the comments received.

Closing balance limits, the maximum amount an institution may hold in the account at the end of each business day, would now be calibrated to each holder’s expected payment activity, and the ceiling for those limits was raised from the level initially proposed.

The comment period will remain open for 60 days after the proposal is published in the Federal Register, giving banks, fintech firms, crypto custodians, and other stakeholders time to weigh in.

Tier 3 access requests temporarily paused

The Board is also encouraging Reserve Banks to pause decisions on account-access requests from institutions classified under Tier 3 of the Board’s Account Access Guidelines. Tier 3 covers applicants that pose the most novel risk profiles, a category that has included crypto-native firms and other non-traditional financial companies.

The temporary halt is designed to let the Fed gather public input and finalize the payment account framework before adjudicating those applications, promoting what the Board called greater clarity and consistency.

Why this matters for crypto and fintech

For years, non-bank financial companies have been stuck in an awkward middle zone. They build products that move money, store value, and process payments, but they’ve had to rely on traditional banks as intermediaries to actually touch the Fed’s infrastructure. That relationship has been, to put it gently, complicated.

Crypto firms in particular have struggled to maintain banking relationships, a phenomenon the industry calls “debanking.” When your bank can cut you off from the financial system’s plumbing at any time, your business model rests on someone else’s goodwill. Direct Fed access, even limited access, changes that dynamic fundamentally.

The skinny account proposal doesn’t rewrite eligibility rules, though. Only institutions that already qualify under existing legal frameworks can apply. This isn’t an open invitation for every DeFi protocol with a governance token to open a Fed account. It’s a structured pathway for companies that have already cleared regulatory hurdles but lack direct system access.

The request for public input follows President Donald Trump’s Tuesday executive order targeting reducing regulatory barriers for fintech and crypto firms. The order directs federal agencies to review rules that may hinder innovation and asks the central bank to evaluate payment account access for non-bank and digital asset companies.

Expanded access could allow crypto companies to connect directly to US payment systems, reducing reliance on intermediary banks and improving transaction efficiency.