Kraken's Fed master account could be the new normal

• Key insight: Though some details are still unknown about what privileges come with Kraken's Fed master account, some stakeholders say the approval could serve as a model for future applicants once the Fed finalizes its limited payment account later this year.
• Expert quote: "For those of us who spend our lives reading the regulatory tea leaves, we did not expect to find this in our teacups." — Michele Alt, co-founder and managing director at Klaros Group.
• Look ahead: The Federal Reserve is expected to issue guidance on its limited master account by the end of the year. 

WASHINGTON —  The Federal Reserve's approval of a limited master account for Kraken Financial in March caught some market observers off guard. Many had expected that the central bank would first finalize guidance for its so-called "skinny" master accounts before granting payment system access to nontraditional institutions such as cryptocurrency firms.

Regardless of the timing, stakeholders say the approval could set a precedent for other firms seeking access to the Fed's payment and settlement rails. Michele Alt, managing director at Klaros Group, called the move "a stunner" and said it signals that regulators may be willing to experiment before formal guidance is finalized.

"For those of us who spend our lives reading the regulatory tea leaves, we did not expect to find this in our teacups," Alt said.

The Federal Reserve Bank of Kansas City granted the cryptocurrency exchange access to the central bank's payment network for one year, but it is still unclear from public records precisely what that approval entails for Kraken. The company did not respond to a request for comment. Regional Federal Reserve banks, rather than the Fed's Board of Governors, approve entities for master accounts, meaning Kraken's approval did not require board sign-off. 

Julie Hill, dean of the University of Wyoming College of Law, said Kraken's application, filed in October 2020, was already well underway and could serve as a pilot program for the central bank — a view echoed by Fed Chair for Supervision Michelle Bowman in a recent appearance.

"One of the things they might have been thinking was, 'Let's get some experience with one of these to see how it goes, so our rules will be better,'" Hill said. "They may have been thinking of this as something like a pilot project."

Hill suggested the approval may imply that the Fed could grant some master accounts in the near future to other nontraditional banks, depending on the type of access sought.

"I think it may depend on both the risk profile of the requesting entity and also the range of services the requesting agency wants access to," she said. "I think that it's possible we might see a few more before the guidelines are finalized, but I think that they generally be [firms that are] well-vetted and have a fairly straightforward business plan."

Federal Reserve

Fed's Bowman views Kraken approval as 'pilot program'

March 5, 2026 4:57 PM

By Maria Volkova

Banking groups have cautioned that allowing nontraditional firms access to the Fed's payment rails could create oversight challenges. David Zaring, an associate professor at the University of Pennsylvania, said the Fed likely determined that Kraken's regulatory safeguards address those risks.

"Substantively, the question for Kraken — which has been around for a long time — is whether its Know Your Customer rules and anti-money laundering obligations are up to snuff," said Zaring. "By granting them payment access, the Fed's comfortable that it's got adequate procedures in place to deal with that."

But what exactly Kraken is able to do today versus what it could do a month ago is still not entirely clear — nor is it clear how Kraken's account would differ from a so-called "skinny account" under development by the Fed board. Alt said the approval remains opaque, calling Kraken's limited master account a "black box." 

"We don't even really know what kind of account they were approved for," she said. "We can assume that it was a skinny account … but was it? We don't know because the Fed has not finalized its policy framework or standards for that."

A statement from the Kansas City Fed on March 4 said it does not disclose specific information about account holders' access.

The skinny master account, first proposed by Fed Gov. Christopher Waller in October, would give fintech firms limited access to the central bank's payment rails. Under the current proposal, account holders would have access to the Fedwire Funds Service, the National Settlement Service, FedNow and Fedwire Securities for free transfers only.

Fintech organizations say the prototype is too restrictive and would force them to continue relying on third-party banks, while banking groups are seeking stronger oversight of firms eligible for the account. Even with sharp divisions emerging over the idea, the central bank is targeting the fourth quarter of 2026 to roll out the proposal.

Alt said Kraken's limited master account — and whatever access it ultimately provides — may foreshadow what other nonbanks could seek once the Fed finalizes its skinny account proposal.

"One possibility is that this is some sort of wink and nod between the board and the Kansas City Fed," Alt said. "Then maybe whatever is in the secret account is what a skinny account will look like."