Favourable Information for the encryption industry! The Fed plans to open "slim" main accounts to Circle and Stripe.

According to Bloomberg, the Fed is considering a proposal with far-reaching implications: by establishing “skinny master accounts” (skinny master accounts), granting Fintech giants like Circle and Stripe direct access to the core payment infrastructure of the central bank. These accounts will exclude features like Interest, overdraft privileges, and discount window borrowing, but will still allow selected Fintech companies direct access to the Fed's payment systems. This move will make Fintech more like regulated banks, but it also means that many sponsoring banks that rely on acting as backend providers for Fintech will lose a key source of revenue. The Fed's exploration is seen as a significant signal in the Crypto Assets and Fintech sectors.

Fed Redefines Financial System Boundaries: Fintech May Gain “Banking Privileges”

In a potentially far-reaching shift, the Fed is weighing whether to redefine the boundaries of the U.S. financial system. A proposal currently under consideration aims to grant fintech giants like Circle Internet Group Inc. and Stripe Inc. direct access to the central bank's core payment infrastructure—a privilege historically reserved for commercial banks.

Fed Governor Christopher Waller has asked staff to explore a model for establishing so-called “skinny” master accounts for legally qualified entities. These accounts are streamlined versions of the master accounts banks use to transfer trillions of dollars through the Fed system. The accounts would exclude potential restrictions such as earning Interest, overdraft privileges, and discount window borrowing, but would still provide selected Fintech companies with direct access to the core of the Fed system. Former Fed Board Chief Innovation Policy Analyst Roman Goldstein commented, “He is trying to get these new types of chartered institutions onto the payment rails while avoiding the Fed implicitly or explicitly taking on the responsibility of bailing them out.”

is a significant benefit for Fintech: reducing costs and risks.

For companies like stablecoin issuer Circle, the significance of “streamlining” the main account is substantial. This means they can directly deposit customer reserves with the Fed and manage cash flow without relying on commercial banks as intermediaries.

• Reduce Costs and Risks: This transformation can effectively cut costs, lower counterparty risk, and allow for stricter control over funds.
• Reflecting the New Reality: Governor Waller stated at the meeting on October 21 that the payment landscape and types of providers have undergone significant changes in recent years, and a new payment account model could better reflect this new reality. It is worth noting that Governor Waller is one of the five candidates to succeed the current Fed Chairman Jerome Powell.

The profit model of sponsored banks is facing challenges.

The Fed's move will have implications that extend beyond the payment infrastructure itself. Sponsoring banks that have built profitable businesses by acting as backend providers for Fintech will face the risk of losing critical revenue sources.

Goldstein pointed out: “Many sponsored banks' business models essentially act as 'gatekeepers' for payment systems. With these 'slimmed down' master accounts, Fintech no longer needs to go through these 'gatekeepers'.” However, the services provided by sponsored banks are not merely transactional; they also offer compliance infrastructure, including anti-money laundering monitoring and account reconciliation. If Fintech chooses to operate independently, they will need to replicate or outsource these functions. Nevertheless, the Fed's move marks a quietly but crucial shift: as Fintech's business models rapidly converge with those of regulated banks, the Fed is beginning to view Fintech as entities closer to regulated banks.

Lessons from Past Regulatory and Access Experiences: SPDI and Tier 3 Applications

For many years, many companies have been seeking alternative ways to access the Fed's infrastructure, with the main approach being through professional banking licenses. For example, the special purpose depository institution (SPDI) license in Wyoming is specifically designed for digital asset companies. However, companies like Custodia Bank that hold this license have faced obstacles when applying to access payment systems.

Faced with industry and legal pressures, the Fed has introduced a tiered review system to handle account applications. The crypto custody institution Anchorage Digital Bank, which holds a national trust license, recently submitted an application under the “Tier 3” category (typically associated with the strictest level of scrutiny). Its application is widely seen as a bellwether for future applications from other companies, including the Bridge platform of Circle and Stripe. Notably, the “streamlined” account plan by Director Waller is similar to the license structure of the electronic money institution (EMI) in Europe, which allows payment access but does not grant lending rights or rescue protections.

Conclusion

The Fed's consideration of “streamlining” the main account is another landmark initiative by the U.S. financial regulatory authorities in response to the rise of Fintech and Crypto Assets. It not only reflects the Fed's willingness to embrace payment innovation but also demonstrates a cautious approach to maintaining system stability and avoiding rescue responsibilities while granting direct payment permissions to new financial institutions. Although the profit model of sponsoring banks will be challenged, it will ultimately drive the entire financial system towards a more efficient and direct payment track, further blurring the lines between traditional banks and emerging Fintech.

Disclaimer: This article is for news information only and does not constitute any investment advice. The cryptocurrency market is highly volatile, and investors should make decisions cautiously.