The Federal Reserve’s (Fed) decision this Wednesday to grant its first-ever master account to a crypto-focused institution has triggered swift opposition from major banking groups, intensifying tensions between traditional finance and the digital asset sector at a pivotal moment for US crypto legislation.
Opposition From US Banking Groups
Kraken Financial, the Wyoming-chartered banking arm of the exchange, announced that it had secured a Federal Reserve master account—becoming the first digital asset bank in American history to gain direct access to the central bank’s payment infrastructure.
However, the account comes with limitations. Under the so-called “skinny” master account framework outlined by Federal Reserve Governor Christopher Waller, Kraken is permitted to hold reserves and settle transactions in central bank money.
At the same time, it does not receive full banking authority. The firm cannot issue loans, tap into the Fed’s discount window, or function as a conventional commercial bank. In essence, it gains access to payment systems without the broader powers afforded to insured depository institutions.
Even with those restrictions, the move has drawn sharp criticism from the traditional banking industry. The backlash arrives as banks are already engaged in a broader fight over crypto-related legislation.
Industry groups have been pushing to remove the stablecoin rewards provision from the GENIUS Act—legislation that was signed into law by President Donald Trump last year.
That dispute has contributed to delays surrounding the passage of the wider crypto market structure bill known as the CLARITY Act. Now, leading US banking associations are publicly opposing the Federal Reserve’s approval of Kraken’s master account.
Alleged Risks In Expanding Crypto Access
According to Eleanor Terrett from Crypto In America, banking lobbyists argue that the Kansas City Federal Reserve “violated policy” by approving Kraken’s application without going through the customary public comment process.
The Independent Community Bankers of America (ICBA) has expressed strong objections, stating it is “very concerned” about granting crypto firms access to master accounts because it views the sector as a potential risk to financial stability.
Meanwhile, the Bank Policy Institute has accused the Kansas City Fed of effectively front-running the Federal Board’s public comment period and failing to follow established procedures when implementing what they characterize as a significant change to the US payments system.
In their view, granting nonbank entities and crypto institutions access to master accounts—historically limited to highly regulated, insured banks—introduces new vulnerabilities.
At the same time, President Trump has entered the debate. Addressing the legislative impasse surrounding the CLARITY Act, also known as the crypto market structure bill, Trump posted on Truth Social, expressing clear support for the crypto industry in its ongoing dispute with banks over stablecoin yield provisions.
He urged Congress to move swiftly in passing comprehensive crypto market structure legislation. Despite the President’s backing, banking groups remain unconvinced.
According to a banking source involved in negotiations who spoke to Crypto In America, concerns persist that “ambiguous legislative language” could enable crypto companies to bypass a prior agreement not to offer interest or yield on idle stablecoin balances.
“We want to continue negotiating, and what we’re trying to do is defend the agreement in-principle of no interest on balances, making sure no holes are punched in that,” the source said, adding that banks had sent proposed legislative revisions to the White House several days earlier but had not yet received a response.
Featured image from OpenArt, chart from TradingView.com
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