You never see the most important part of your payments. When an app says your money has been moved, a number will change on your screen and the transaction will look completed.
But beneath these interfaces lies a separate, invisible chain of bank reserves, settlement accounts, and Fed infrastructure that determines when your funds are actually released, who controls that settlement, and which institutions are allowed to participate in it at all.
For crypto payments, that underlying system is off-limits. Exchanges and crypto companies have had to route all their dollar payments through partner banks, which handled the actual settlement with the Federal Reserve on their behalf. When these relationships collapsed during the Silvergate and Signature Bank failures in 2023, they revealed how fragile that relationship was, and the industry has since pushed for direct access to the Fed.
Two coinciding developments this week have brought this matter to a head. In December 2025, the Fed formally solicited public comment on a new “checking account” that would allow eligible non-bank institutions to clear and settle payments through the Fed infrastructure without receiving the full suite of privileges available to traditional bank master accounts.
Then, on May 19, President Trump signed an executive order titled “Integrating Financial Technology Innovation into Regulatory Frameworks,” which directed the Fed to submit a comprehensive review of its payment access framework within 120 days and establish transparent application processes within 90 days. The executive order cannot force the Fed to act, but political support at that level often makes it clear which direction institutional attention is pointing.
Kraken provided the first real data point in March. The Federal Reserve Bank of Kansas City on March 4 approved a limited-purpose master account for Kraken Financial, the exchange’s Wyoming-chartered banking subsidiary, making it the first crypto company in the U.S. to gain direct access to the Fed’s core payments system after more than five years of regulatory involvement.
The account connects Kraken Financial directly to Fedwire, the real-time gross settlement network that processes trillions of dollars in wire transfers every day, eliminating the intermediary banks that previously handled dollar settlements on Kraken’s behalf.
However, it is a limited arrangement: the exchange does not earn interest on reserves and does not have access to the discount window or intraday Fed credit. What it has delivered is settlement independence from the correspondent banking system, and for a company that handles large institutional volumes, that is a huge structural shift.
Ripple, which has applied for its own Fed master account and supports a limited account structure for its RLUSD stablecoin, is one of the most obvious next beneficiaries. Circle, whose USDC reserve management is highly dependent on the speed of dollar settlement, has similarly strong business reasons for wanting direct access.
Kraken’s approval is now a live test case, and companies in the payments and stablecoin world are watching how the experiment develops before deciding how hard to push their own applications.
What will the Fed’s proposed bill actually do?
The checking account that the Fed proposed in December is structurally different from a full master account. With a full master account, a regulated depository institution can hold balances with the Fed, earn interest on those reserves, access intraday credit, and borrow through the discount window during periods of liquidity stress.
The proposed checking account makes all that unnecessary. Eligible institutions would be able to settle through Fedwire, FedNow, and the National Settlement Service, maintain limited reserves, and process payments through Fed infrastructure, but the Fed has made clear that the new account type would not expand or otherwise change regulatory eligibility for its services. Most applicants would still have to qualify under the existing criteria, and balance limits would apply.
Crypto and fintech companies would still see practical benefits. Exchanges and stablecoin issuers currently rely on banking intermediaries for dollar settlement, which concentrates operational risk. When a banking partner faces regulatory issues or withdraws from crypto clients, the securities can reach multiple platforms at once.
Direct access to the Fed’s settlement infrastructure reduces that exposure and gives companies better control over their dollar liquidity during periods of high volume. For stablecoin issuers specifically, the ability to move reserves quickly and predictably during tough redemption periods could be the difference between an orderly and a disorderly market.
Fed Governor Christopher Waller said a streamlined checking account should be up and running by the end of 2026, suggesting the central bank sees this as a short-term outcome rather than a long-term goal.
Why are the banks fighting the Fed, and what are they really worried about?
The banking sector’s opposition to the current account framework has been quite vocal and organized. It’s also worth examining carefully because it combines legitimate risk concerns with what can only be described as competitive anxiety.
The Bank Policy Institute, backed by JPMorgan, Bank of America and other major institutions, has argued that even limited direct access to Fedwire for crypto and fintech companies could threaten financial stability and create vulnerabilities to money laundering.
Fed Governor Michael Barr disagreed with the December proposal on grounds of illegal financing and said it lacked adequate safeguards. Kraken’s master account immediately drew criticism from banking groups, which said the Kansas City Fed’s approval did not provide enough transparency around the risk controls imposed.
Some of those arguments hold water. Non-bank institutions operating on Fedwire would do so under a different regulatory framework than insured banks, and AML compliance among crypto and fintech companies has historically been less scrutinized. Potential liquidity issues are also worth taking seriously: as funds migrate more quickly from insured bank deposits to non-bank platforms with direct access to settlement, deposit flows become more volatile. An operational failure at a related non-bank institution during a period of market stress could cause resolution disruptions that propagate far beyond that company.
The competitive dimension is discussed somewhat less openly. Exchanges and other crypto platforms currently pay banks in dollars for the correspondent banking access they need to operate, and a direct Fed settlement would restructure that arrangement, giving the companies that previously paid for it independence from settlement. For the major institutions supporting the opposition campaign, the risk of losing these mediation activities is probably at least as motivating as the risk of systemic disruption.
The Fed’s draft attempts to indicate the difference: limited accounts, no backstops, no functional equivalence with insured banks, and eligibility requirements that most applicants will not automatically meet.
Whether that structure will hold up under simultaneous pressure from crypto companies pushing for more and banking groups pushing for nothing is really open. Kraken’s limited account is still a live experiment, the December comment period is still ongoing, and Trump’s executive order is less than a week old.
For the first time, the debate over who gets to settle dollars within the Federal Reserve system is being tested in practice rather than discussed in theory.