Fed Weighs Limited Payment Accounts as Crypto and Banks Clash

The Federal Reserve is facing a growing policy crossroads as crypto firms and traditional banks clash over a proposal that could reshape access to the U.S. payment system. At the center of the debate is a narrowly designed Federal Reserve account that would allow certain non-bank financial firms to settle payments directly in central bank money, without granting them the full privileges of a bank.

However, the proposal has triggered a sharp divide. Crypto and fintech groups argue the move would modernize payment infrastructure and reduce dependence on a handful of large banks. Banking trade associations, on the other hand, warn that it could blur regulatory boundaries and introduce new stability risks into the financial system. The disagreement has now reached both the Federal Reserve and the White House, underscoring how politically sensitive payment access has become.

A Push for Limited Access, Not Full Banking Rights

In a February 9 letter to the Federal Reserve Board, the American Fintech Council formally backed the concept of a restricted account designed solely for payment settlement. The group emphasized that the structure would be far narrower than a traditional Federal Reserve Master Account, which provides banks with access to credit facilities, interest on reserves, and other core central banking services.

According to the council, the proposed Fed Payment Account would allow eligible fintech and crypto firms to clear and settle transactions directly through the Federal Reserve system. It would not provide access to the discount window, would not pay interest on balances, and would not function as a general deposit account. The AFC framed the model as a way to increase competition in payments while preserving existing prudential safeguards.

Phil Goldfeder, the council’s chief executive, said a carefully designed account could expand responsible innovation without undermining the Federal Reserve’s long-standing risk controls. The letter further argued that the current system forces many non-bank payment firms to rely on intermediary banks, creating bottlenecks and limiting competition in areas such as real-time payments.

How the Proposal Emerged

Per reports, the Federal Reserve first invited public feedback on the payment-only account model in December 2025, following earlier remarks by Governor Christopher Waller in October that explored alternatives to full master accounts. The central bank asked stakeholders to comment on how a restricted account might work, what limits should apply, and how risks could be contained.

That request drew 44 formal comment letters by the close of the consultation period. The responses revealed a clear split. Crypto-focused organizations and fintech trade groups largely supported the idea, while major banking associations urged caution and, in some cases, outright opposition.

Supporters see the Fed Payment Account as a technical fix to a structural problem. They argue that non-bank firms already handle large volumes of consumer and institutional payments but must route settlements through sponsor banks. However, direct access to systems such as Fedwire and FedNow, they say, could reduce costs, improve speed, and spread operational risk more evenly across the system.

Crypto Industry Support and Caveats

Several digital asset firms submitted letters backing the proposal. One such stablecoin issuer, Circle, argued that limited accounts could increase the resilience of the payment system by diversifying access points to central bank settlement infrastructure. The company said the model could reduce single-bank dependencies that have proven fragile during periods of market stress.

The Blockchain Payments Consortium, whose members include Fireblocks, Polygon, Solana, and TON, also echoed that view. The group said limited accounts could curb what it described as uncompetitive practices by reducing concentration at a small number of large settlement banks.

Still, not all crypto firms were uncritical. Anchorage Digital called the proposal a positive step but said key restrictions still left gaps. The firm noted that account holders would lack direct access to the automated clearing house network and would face caps on balances without earning interest on reserves. Anchorage argued that those constraints could limit the practical usefulness of the model for certain payment flows.

Banks Warn of Policy and Stability Risks

On the other hand, banking groups took a markedly different tone. The American Bankers Association, for instance, said many potential account holders lack a long supervisory track record and are subject to uneven safety-and-soundness standards. The group warned that extending central bank settlement access beyond traditional banks could weaken the regulatory perimeter.

In a joint submission, the Bank Policy Institute, the Clearing House Association, and the Financial Services Forum argued that the proposal represents a fundamental policy shift. They said even a narrowly scoped account would connect uninsured or lightly supervised institutions to the Federal Reserve’s balance sheet.

The banks warned that payment-only accounts could still support deposit-like activity outside the federal safety net. They pointed to risks of rapid withdrawals, or “runs,” during periods of stress, particularly if stablecoin issuers or crypto-linked firms were among the beneficiaries. According to the joint letter, balance caps alone may not be sufficient to contain those risks.

Stablecoins at the Heart of the Debate

Although the Federal Reserve’s proposal does not explicitly reference crypto assets, stablecoin issuers are widely seen as prime candidates for a Fed Payment Account. Banks argue that stablecoins often function like deposits, facilitating payments and storing value, but without deposit insurance, established resolution regimes, or consolidated supervision.

Conversely, crypto groups counter that stablecoins already play a significant role in global payments and settlement, especially in cross-border transactions. They argue that direct settlement in central bank money could reduce reliance on commercial bank deposits and lower systemic risk by improving transparency and settlement finality.

Consequently, this tension has drawn the White House. According to Crypto In America, senior policy staff are scheduled to meet with representatives from both banking and crypto trade groups to explore potential areas of compromise. The meeting is expected to include officials from major banks, such as Bank of America, JPMorgan, and Wells Fargo, as well as Coinbase's legal leadership.

What Comes Next

For now, the Federal Reserve has not indicated whether it will move forward with the proposal or revise it in response to industry feedback. But the volume and intensity of comment letters highlight how consequential the decision could be for the future structure of U.S. payments.

At stake is whether the central bank can design a Fed Payment Account that expands access to its settlement rails without eroding the regulatory framework built around traditional banking. The debate has exposed deeper questions about who should be allowed to interact directly with central bank money in an economy where payments are increasingly digital, instant, and platform-driven.

As regulators weigh the next steps, the clash between innovation and stability is likely to intensify, with access to payments emerging as one of the most contested policy issues in the evolving financial system.