Federal Reserve opens up master account access to banks with ‘novel charters,’ in win for crypto and fintech

The Federal Reserve Board is opening up its access to Fed «master accounts» to new charter types — in theory.

On August 15, the Federal Reserve announced that it had finalized new guidelines on reserve banks considering offering master accounts to new institutions. Master accounts are a critical link in the US (and international) financial chain; without them, financial servicers are dependent upon intermediary banks that have them. 

The new guidelines effectively standardize consideration for master accounts for firms with «novel charters.» The finalization follows an extensive comment period, which the Fed noted as featuring a vocal response from «institutions with novel charters, such as cryptocurrency custody banks, and their trade associations.» 

Criticism included the notion that the proposal would «expand access to accounts and services to institutions with novel business models that pose high levels of risk to the payments and banking system,» specifically naming «‘fintech’ related business models.»

All seven members of the Federal Reserve Board voted in favor of the motion. The new guidelines maintain that institutions without FDIC insurance will face more scrutiny in consideration of a Fed master account.

The issue of master accounts for fintech firms has been remarkably contentious. Crypto bank Custodia, formerly known as Avanti, is suing the Fed for delaying a decision on its application. 

Reserve Trust Company secured such a charter in 2018 after hiring former Fed Governor Sarah Bloom Raskin, resulting in a controversy that ultimately sandbagged Bloom Raskin’s re-nomination to the Fed early in 2022. 

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