Kraken’s Federal Reserve Master Account: Crypto Banking Milestone Sparks Industry Backlash
Kraken Financial has become the first crypto-native firm in U.S. history to receive a Federal Reserve master account, the Kansas City Fed confirmed on Wednesday, March 4. The approval gives Kraken’s Wyoming-chartered banking arm direct access to Fedwire, the central bank’s real-time gross settlement network, ending years of dependence on intermediary correspondent banks for dollar settlement.
The account was granted to Kraken Financial under Wyoming’s Special Purpose Depository Institution framework, a structure that requires the bank to hold liquid assets equal to or exceeding 100 percent of client fiat deposits. The application, filed in October 2020, took five and a half years to clear a process that included extensive examination and operational scrutiny by both Wyoming state supervisors and the Federal Reserve itself.
What the Account Actually Grants
The approval is classified as a Tier 3 limited-purpose account, aligned with what Fed Governor Christopher Waller has described as a “skinny” master account framework, a model he aims to finalise by year-end. Kraken Financial can now hold reserves and settle transactions directly in central bank money, removing the counterparty risk and operational delays that come with routing payments through partner banks. However, the firm cannot earn interest on reserves, access the Fed’s discount window, or operate lending facilities. The account carries an initial one-year term, reflecting the Fed’s deliberate, phased posture toward crypto integration.
Similar payment-only accounts already exist at central banks in the United Kingdom, the European Union and Switzerland, positioning the United States closer to an established international standard rather than charting entirely novel territory.
Bitcoin BTC$77,250.00▲1.50%
Ethereum ETH$2,109.21▲1.97%
Tether USDT$0.9990▲0.03%
BNB BNB$661.00▲1.72%
XRP XRP$1.35▲1.39%
USDC USDC$0.9997▼0.00%
Solana SOL$85.28▲1.61%
TRON TRX$0.3715▲1.98%
Figure Heloc FIGR_HELOC$1.03▲0.00%
Dogecoin DOGE$0.1022▲1.46%Industry Reaction: Political Support, Banking Backlash
Political reaction was swift and sharply divided. Senator Cynthia Lummis, who chairs the Senate Banking Subcommittee on Digital Assets and has been central to Wyoming’s crypto-friendly legislative agenda, called the decision “a watershed milestone in the history of digital assets.” She suggested the approval could accelerate Bitcoin adoption within regulated financial institutions and predicted that banks and crypto firms will increasingly acquire one another in the years ahead.
The banking industry pushed back with equal force. The Independent Community Bankers of America and the Bank Policy Institute both issued formal objections within hours of the announcement. ICBA chief executive Rebeca Romero argued that granting master account access to non-bank entities “poses risks to the banking system’s stability,” while the BPI criticised the Fed for a lack of transparency in its approval process, describing the decision as one that ignored public comment the central bank had itself solicited.
The dispute sits inside a broader legislative contest. President Trump, the same evening, accused traditional banks of undermining both the GENIUS Act and the stalled CLARITY Act, writing on Truth Social that the United States would not allow banks to derail its “crypto agenda.” A Treasury Department report published earlier this year estimated that stablecoin growth could generate up to 6.6 trillion dollars in deposit outflows from traditional banks, a figure that gives the banking sector’s resistance a concrete financial basis.
What Comes Next
Kraken says the master account will be rolled out in phases, beginning with institutional client activity on its exchange before extending across Payward’s broader settlement infrastructure. Other applicants, including Custodia Bank, which has been in active litigation against the Fed since 2022, and Anchorage, which holds an OCC trust charter, are now watching closely. Kraken’s approval effectively serves as a pilot for the skinny master account framework, and its outcome is likely to shape how the Fed adjudicates the queue of pending applications from digital asset firms seeking the same direct connectivity.
