Fed advances 'skinny' payment account proposal

The Federal Reserve Board voted to seek public comment on a scheme that would allow direct access to the payment rails it operates by non-bank financial institutions such as financial technology and crypto firms. Currently, these firm have had to partner with third parties (notably federally insured financial institutions) that have full-fledged access to the Fed's payment rails through what are called "master accounts."

The Fed Board's move comes just days after President Trump issued an executive order instructing federal regulators to update regulations and procedures that may be stifling innovation by fintechs.

"To foster this financial innovation, the federal government must update regulations to allow integration of digital assets and innovative technology into traditional financial services and payment systems," the Executive Order states. "The federal government must also remove overly burdensome and fragmented regulations and supervisory practices that form barriers to entry and primarily benefit incumbent financial services firms."

Fed was already on the case

The proposal the Fed voted to seek comment on mirrors closely a "request for information" it issued last fall that sought public input on the creation of limited or "skinny" master accounts that fintechs and crypto firms could use to clear and settle payments directly through the Fed.

Unlike federally insured financial institutions, which apply for and maintain master accounts with Federal Reserve Banks, nontraditional financial firms would not have access to the Fed's discount window or intraday credit, nor would they be able to earn interest on balances held at Reserve Banks. Additionally, they would have access only to payment services with automated controls to prevent overdrafts.

The term "skinny" accounts, which was first broached publicly by Fed Governor Christopher Waller in a speech in October 2025, refers to these limitations.

"The proposal would not expand or otherwise change legal eligibility for access to accounts or payments services from the Federal Reserve, and affirms that the Reserve Banks would expect payment account holders to mitigate illicit finance risks," the Fed Board wrote in a memo accompanying the request for comment.

Master accounts are approved at the Federal Reserve Bank level. The Fed Board, in its request for comment, said it was urging Reserve Banks to pause pending applications for master accounts from nontraditional financial institutions until the Board creates a framework for the nontraditional financial firms to apply for accounts and gain direct access to payment rails.

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