Recent events at the US Federal Reserve signal acceptance of digital assets at the highest levels of the country’s monetary system.
Kraken recently became the first crypto exchange to receive a master account at the Federal Reserve.
The Fed could also see a new crypto-friendly chair. US President Donald Trump on Wednesday submitted a pro-Bitcoin candidate for the Senate’s consideration.
These developments represent a significant shift in how the Fed could treat the crypto industry. But there are also detractors.
Why are Fed master accounts so important to the crypto industry?
On Wednesday, Kraken announced that its Wyoming-chartered bank, Kraken Financial, had been awarded a Fed master account. This made it “the first digital asset bank in US history to gain direct access to the Federal Reserve’s payment infrastructure.”
Kraken co-CEO Arjun Sethi said, “With a Federal Reserve master account, we can operate not as a peripheral participant in the US banking system, but as a directly connected financial institution.”
The master account represents access to the most coveted form of money for financial institutions: dollars held directly within the Federal Reserve system.
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These dollars are widely perceived as risk-free. Aaron Brogan of Brogan Law, a firm specializing in digital assets, said they “are the intrinsic architecture of the United States monetary system, which can always just make more of them.”
Since United States dollars remain the preeminent global currency, the best form of USD is the best there is. Other instruments like cash, dollars in FDIC-insured bank accounts and T-Bills are pretty good, but Fed dollars are the best.”
For an exchange like Kraken, “it improves reliability and efficiency for moving fiat deposits in and out of digital-asset markets,” according to Sethi.
But not every financial institution is granted access, and certainly not the upstart disruptors of the cryptocurrency industry, at least not until now.
What are Federal Reserve master accounts?
The Federal Reserve System is split into 12 different banks. While these banks come together for important policy decisions, each has a certain degree of autonomy.
In an effort to bring the Fed system a bit closer together, Congress passed the Monetary Control Act of 1980. The law gave all depository institutions access to Federal Reserve accounts. This was the beginning of the master account.
Julie Andersen Hill, the dean of the University of Wyoming’s College of Law, wrote that Congress “intended that all depository institutions would be able to use the Federal Reserve’s payment systems. The legislative history of the Monetary Control Act is littered with references to ‘open access’ to ‘all depository institutions.’”
However, as the banking industry changed, the Fed began to express preferences over who got access and how much. Per Brogan, three tiers developed:
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Tier 1: Federally chartered banks with deposit insurance
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Tier 2: Federally chartered banks without deposit insurance
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Tier 3: State-chartered banks
“Perhaps unsurprisingly, the Federal Reserve Board thinks banks in Tier 1 should get master account access, while Tier 3 banks are subject to heightened scrutiny, and Tier 2 somewhere in the middle,” he wrote.
The crypto industry has long had a problem with finding banks willing to serve them. Those that would were often state-chartered banks, which already had trouble accessing the federal system.
Related: Banks can’t seem to service crypto, even as it goes mainstream
The Fed doesn’t want to be too exclusive with master accounts. According to Thomas Kingsley, director of financial services policy at the American Action Forum, “During periods of stress, access to central bank settlement accounts can materially affect a firm’s ability to meet redemption demands. In that sense, master account access can reduce run risk relative to structures reliant on commercial bank deposits.”
However, the Fed also doesn’t want to give out access to just any institution. Per Kingsley, “If a large nonbank with a master account were to experience operational failure or disorderly unwinding, the disruption would occur closer to core financial infrastructure.”
Enter the skinny account. In October 2025, Fed Governor Christopher J. Waller proposed a new type of account that would provide access to Fed payment rails, but also control for certain risks, while carrying restrictions. These are:
This is what Kraken got. It may be limited, comparably, but it is still a major victory for the institutionalization of crypto. Pro-crypto Senator Cynthia Lummis called it a “watershed milestone in the history of digital assets.”
Bank groups push back on account
Not everyone’s happy about it. Independent Community Bankers of America (ICBA) CEO Rebeca Romero Rainey wrote, “Granting nonbank entities and crypto institutions access to master accounts poses risks to the banking system.”
She said that there are “significant risks to expanding direct Fed account access to institutions that operate outside the traditional banking regulatory framework.”
The Banking Policy Institute’s co-head of regulatory affairs, Paige Pidano Paridon, said the BPI was “deeply concerned” that the Fed approved the “‘limited purpose’ master account—which appears to be a ‘skinny’ account—before the Federal Reserve Board has finalized its policy framework for those accounts.”
She said that the decision ignored public comment the Fed sought on skinny accounts and was made “with no transparency into the process for approval or the risk mitigants that have been imposed to address the very significant risks it raises.”
A pro-crypto banker could soon lead the Fed
In addition to the US central bank giving accounts to crypto exchanges, the bank itself could soon be led by a pro-crypto economist. On Wednesday, Trump sent the nomination of Kevin Warsh, a Shepard Family Distinguished Visiting Fellow in Economics at the Hoover Institution of Stanford University, to the Senate.
The White House is seeking to make Warsh chair for four years and a governor on the Fed board for 14 years.
Warsh, who served as a Fed governor under former US Presidents George W. Bush and Barack Obama from 2006 to 2011, has made some pro-crypto remarks in the recent past.
“Bitcoin does not make me nervous,” he said in a May 2025 interview. He said that billionaire investor Marc Andreessen, “showed me the white paper […] I wish I had understood as clearly as he did how transformative Bitcoin and this new technology would be. Bitcoin doesn’t trouble me. I think of it as an important asset that can help inform policymakers when they’re doing things right and wrong.”
Warsh’s nomination may not be smooth sailing. Democratic lawmakers and central banking policy experts alike have expressed concerns about the Trump administration’s continued efforts to exert control over the Fed.
Trump has wanted interest rate cuts for months, but the Fed, currently chaired by Jerome Powell, has not complied with his wishes.
In January, Trump’s Department of Justice served the Federal Reserve with grand jury subpoenas and threatened Powell with a criminal indictment over alleged misuse of funds to build an office building. Powell claimed that the real argument was over the Fed’s unwillingness to follow orders from the White House.
The US central bank is increasingly accepting cryptocurrency, a trend that is likely to continue with new, more favorable policies and pro-crypto leadership.
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