Trump Signs Executive Order, Kraken, Coinbase, and Others Expected to Access Federal Reserve Payment Channels
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Trump Signs Executive Order, Kraken, Coinbase, and Others Expected to Access Federal Reserve Payment Channels
Ripple, Coinbase, and Circle are the most direct beneficiaries of this policy relaxation.
Navigating Web3 tides with focused insightsBy: Oluwapelumi Adejumo
Translated by: Luffy, Foresight News
U.S. President Donald Trump has formally pressured the Federal Reserve to re-examine highly contentious access rules governing America’s financial sector—intensifying an industry-wide battle over whether crypto firms and fintech companies can directly connect to the central bank’s payment systems.
On May 19, Trump signed an executive order directing the Federal Reserve to assess its policies on granting nonbank financial firms—including those engaged in digital assets, blockchain services, and other fintech activities—access to payment accounts.
Titled “Integrating Financial Innovation into the Regulatory Framework,” the order instructs federal regulatory agencies to review existing rules and eliminate redundant regulations that hinder financial innovation.
The order does not immediately grant crypto firms direct access to the Fed’s payment infrastructure. However, it explicitly authorizes the Federal Reserve to examine whether current laws permit broader access—and, if so, to clarify the application process.
The outcome of this review is critical: it will determine whether firms such as Kraken, Ripple, Coinbase, Circle, Anchorage, Wise, Paxos, and BitGo can reduce their reliance on intermediary banks and move closer to the core U.S. dollar wholesale clearing infrastructure.
A Shift in Policy Winds for Fed Master Account Access
The executive order centers on the Federal Reserve’s master account—a type of account that grants institutions direct access to the full suite of Fed payment services, including the Fedwire Funds Service, the U.S. dollar large-value interbank transfer system.
Under current Fed rules, master accounts are generally available only to depository institutions. As a result, many crypto firms have had to pursue alternative paths—such as applying for special-purpose bank charters or national trust bank charters—to qualify for direct access.
Trump’s directive requires the Fed to comprehensively reassess its master account access criteria and clarify whether each of the 12 regional Federal Reserve Banks possesses independent statutory authority to approve or reject applications for such accounts.
In March, the Federal Reserve Bank of Kansas City granted Payward—the parent company of Kraken—a restricted-purpose payment account, marking the first precedent of its kind and making the issue of expanded access increasingly urgent.
Beyond master accounts, the order also mandates regulators to conduct a broad review of barriers hindering fintech development—including licensing rules, third-party risk management guidance, and policies constraining collaboration between banks and technology firms.
U.S. Senator Cynthia Lummis welcomed the new policy as a corrective measure addressing long-standing access restrictions faced by fintech firms. She noted that legacy financial institutions have historically monopolized core payment infrastructure, while emerging tech firms have remained excluded. This executive order aims to foster fair competition, stimulate industry vitality, and lower consumer payment costs.
Paul Grewal, Chief Legal Officer at Coinbase, voiced strong support, arguing that existing payment access rules and third-party risk management standards are outdated—favoring traditional financial incumbents while stifling innovation. He emphasized the urgent need for regulatory modernization.
This sentiment reflects a widespread industry demand: access to the central bank’s core payment network has become a decisive competitive barrier. Firms unable to connect directly must route transactions through banks—an arrangement that increases operational costs, slows settlement efficiency, and exposes them to counterparty risks inherent in their banking partners.
Kraken Offers a Viable Model for Crypto Firms
Kraken provides a practical example of how broader access could be achieved. In March, the Federal Reserve Bank of Kansas City granted Kraken Financial—a regulated financial subsidiary of Kraken—a restricted-purpose account, enabling direct access to the core U.S. dollar wholesale clearing infrastructure. This allows the platform to process institutional client deposits and withdrawals more efficiently—particularly facilitating rapid movement of large sums among exchanges, custodians, and partner banks.
However, the account comes with clear limitations: it does not confer all services available to insured depository institutions; it earns no interest on reserves; and it cannot access Federal Reserve credit facilities.
Such a restrictive design balances systemic risk mitigation with pragmatic integration into mainstream payment infrastructure. It is likely to become the regulatory template going forward—granting firms access to dollar transfer and clearing capabilities while strictly excluding high-sensitivity functions like overdraft lending, reserve interest accrual, and emergency liquidity assistance.
Caitlin Long, CEO of Custodia Bank, welcomed the new policy. Her institution has long sought Fed access but was rejected in 2023, when the Fed ruled that its crypto-asset–focused business model failed to meet statutory eligibility requirements—highlighting the historical difficulty for licensed crypto firms to achieve full integration into the central banking system.
Kraken’s restricted account has fundamentally shifted regulatory thinking. Regulators now recognize a spectrum beyond binary choices of “full access” or “outright denial.” A tiered-access framework enables crypto firms to gradually integrate into the mainstream payment system—without compromising foundational risk controls.
Ripple, Coinbase, and Circle Are Ready for the Next Phase
Ripple, Coinbase, and Circle stand to benefit most directly from this policy shift. Ripple has already filed an application for a Fed master account and actively supports the adoption of lightweight, restricted-access accounts—enabling nonbank institutions to use basic payment services without encroaching on the Fed’s core financial authorities.
If approved, this would significantly accelerate Ripple’s RLUSD stablecoin operations—streamlining reserve fund transfers and user redemptions. For stablecoin issuers, reserve settlement efficiency and redemption reliability are vital to market confidence. Direct or restricted access to a Fed account would free them from bank intermediation, allowing far more agile dollar liquidity management during mass redemptions or market volatility.
Coinbase and Circle—backed by their USDC stablecoin ecosystem and proprietary payment infrastructure—also face strong incentives to gain Fed access. Both have established federally chartered trust bank structures, further aligning them with the federal regulatory framework and paving the way for Fed payment account applications.
Other firms are also lining up. Anchorage Digital is already a federally chartered crypto bank; Paxos, BitGo, and Fidelity Digital Assets have all obtained national trust bank charters from the Office of the Comptroller of the Currency (OCC). While these charters do not automatically confer Fed payment account access, they substantially narrow the gap between these firms and formal compliance benchmarks.
Industry needs are unambiguous: crypto exchanges seek instant fiat settlement; stablecoin issuers want autonomous control over reserve funds; asset custodians aim to optimize institutional client fund flows; and payment providers urgently wish to reduce dependence on cross-border correspondent banks.
Alex Thorn, Head of Research at Galaxy Digital, stated plainly: “Only depository institutions should be allowed to conduct wire transfers”—this is merely a modern regulatory construct, not an immutable law of finance. With multiple stakeholders now vying for influence, traditional banks are effectively fighting to preserve their monopoly over the payments industry. The prevailing industry view holds that eligibility for payment system access should be determined by a firm’s business activities, regulatory compliance rigor, and risk management capacity—not by adherence to traditional banking business models.
Traditional Banks Warn: Access Must Meet Bank-Level Standards
In response to calls for broader access, the American Bankers Association (ABA) has taken a firm stance against the proposal. The ABA contends that any institution engaging in banking-like activities must be held to the same stringent regulatory standards and consumer protection requirements as traditional banks.
Rob Nichols, CEO of the ABA, publicly stated: “Without uniform, high regulatory standards across the entire industry, both the financial system and ordinary consumers face serious risk. Regarding the White House’s executive order on financial innovation, we urge regulators to uphold the safety and soundness of the financial system—even as they promote innovation—and not lower the bar for entry.”
This remains the banking sector’s central concern. Direct access to the Fed’s payment system is not just another business permission—it entails rigorous oversight, deposit insurance obligations, capital adequacy requirements, liquidity management protocols, and ongoing supervisory examinations. From banks’ perspective, crypto firms operating under lightweight charters—with limited scope and insufficient regulatory parity or risk management maturity—pose unacceptable systemic risks if granted access to core payment infrastructure.
The Fedwire Funds Service serves as the global hub for U.S. dollar clearing. Any disruption caused by a connected institution—whether due to cyberattacks, operational failures, regulatory breaches, or liquidity shortfalls—would reverberate far beyond that firm’s own operations. Moreover, banks invest heavily in anti-money laundering (AML), customer fund monitoring, and suspicious transaction reporting. Regulators must verify that crypto firms possess equivalent compliance capabilities before permitting them to operate across multiple domains—payments, custody, stablecoin issuance, and beyond.
Liquidity diversion is another key concern. If stablecoin issuers and fintech firms can efficiently hold and move funds via the Fed’s infrastructure, they may siphon off significant liquidity currently held within traditional banking channels.
The Fed’s proposed restricted-account framework—by removing interest-bearing features and credit access—partially alleviates these concerns. Yet the banking industry remains unwilling to quietly accept such a fundamental reshaping of the industry landscape.
Although restricted-purpose accounts mitigate most risks through careful permissions delineation, they raise a novel regulatory question: At what point does a nonbank institution’s level of payment activity transform its business nature into that of a formal bank? That question will lie at the heart of future regulatory debates over access boundaries.
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