The Fed Talks Crypto

The Federal Reserve is having a crypto-oriented week. They released the final guidance for novel financial institutions to access the master accounts needed to participate in the global payment system. This guidance creates a multi-tiered system for granting access, each with more strict guidelines.

• Only Tier 1 banks would have access to FDIC insurance.
• Tiers 1 and 2 would be subject to prudential supervision by a federal banking agency.
• The 3rd tier would most likely apply to crypto banks and would have neither FDIC insurance nor prudential supervision by a federal banking agency but would gain access to the master accounts and global payment system.
• The guidance provides an accessible path for crypto-native banks like the Wyoming SPID, Custodia and Kraken Bank to access these master accounts. All 3 of these companies have applied to the Federal Reserve for access to the master accounts so they would not need intermediary banks.
• Custodia and Kraken Bank both received routing numbers earlier this year, which is a precursor to the master accounts, but not a guarantee of future access.

The Federal Reserve may see potential opportunities in crypto, but they also want banks to know that it poses risks as well. After publishing the guidance, they released an open letter advising banks to check with their central bank supervisor before engaging with crypto.