Fed advances 'skinny' payment accounts for nonbanks

• Key takeaway: The Federal Reserve took a step toward finalizing its skinny master account framework on Wednesday, publishing a proposal for public comment and suggesting for the Reserve Banks to temporarily pause decisions on access requests from institutions classified as Tier 3.
• Expert quote: "To promote greater clarity and consistency, the Board is also encouraging Reserve Banks to temporarily pause decisions on access requests from institutions that fall within Tier 3 … until the Board has completed its policy development process on the payment account proposal." — Federal Reserve Board
• What's at stake: The Federal Reserve is expected to issue official guidance on its limited master account by the end of the year.  

The Federal Reserve Board published its proposed "skinny" payment account framework late Wednesday after soliciting industry feedback.

While the proposal largely mirrors the request for information released in December, it includes several changes likely to appeal to nonbanks, including a provision tying closing balance limits to an institution's expected payment activity, subject to a hard cap of $1 billion. Still, firms granted access would face limits on how they can use the Fed's payment rails, a restriction likely to draw criticism from nonbank applicants.

The procedural step moves the central bank closer to finalizing the limited master account framework. Federal Reserve Gov. Christopher Waller, who chairs the Fed's payments, clearing and settlement committee, has said the framework could be finalized before the end of 2026. Industry participants will have 60 days to submit comments on the current proposal.

The proposal was approved in a 6-1 vote. Federal Reserve Gov. Michael Barr dissented, citing concerns that the proposal does not sufficiently address oversight and safeguards against misuse.

"It does not provide sufficiently specific and robust safeguards to protect against the accounts being used for money laundering and terrorist financing by institutions we do not supervise," Barr wrote. "Although there has been progress on addressing this concern relative to what was outlined in the earlier request for information, the protections remain inadequate."

As proposed earlier, firms approved for the limited master account would have access only to the Fedwire Funds Service, the National Settlement Service, FedNow and Fedwire Securities for free transfers. The proposal excludes access to the Fed's automated clearing house network, or ACH, which processes electronic debits and credits such as payroll, bill payments, direct deposits and certain check conversions. 

Fintech firms have previously criticized the exclusion of ACH access, arguing they would still need to rely on banks for a significant share of payment activity. Still, in a concession to fintech firms, the Fed raised the overnight balance limit from the lesser of $500 million or 10% of total assets to a flat cap of $1 billion.

In its announcement, the Federal Reserve also directed Reserve Banks to temporarily pause decisions on access requests from institutions classified as Tier 3 until the rulemaking process is complete.

"The temporary pause will allow the Federal Reserve to solicit and consider public input on payment accounts and to promote consistent implementation," the Federal Reserve Board said in its announcement Wednesday.

Federal Reserve

Fed seeks public input on 'skinny' master account concept

December 19, 2025 11:57 AM

By Maria Volkova

The Fed's request for Reserve Banks to pause such decisions follows the Federal Reserve Bank of Kansas City granting cryptocurrency exchange Kraken access to the central bank's payment network for one year, though public records do not make clear what that approval allows the company to do. Regional Federal Reserve banks, rather than the Fed's Board of Governors, approve master account applications, meaning Kraken's approval did not require signoff from the board.

The decision surprised some market observers because many expected the Fed to finalize guidance for so-called skinny master accounts before granting payment system access to nontraditional institutions such as cryptocurrency firms.

The Fed's proposal coincides with the Trump administration issuing an executive order on Tuesday instructing federal bank regulators and the central bank to review and "streamline" their fintech regulations. The order, titled "Integrating Financial Technology Innovation Into Regulatory Frameworks," also suggested that the Federal Reserve should move toward granting more master payment accounts to nonbank fintechs.