Federal Reserve Proposes 'Skinny' Master Account for Non-Traditional Firms

The Federal Reserve has proposed creating a limited payment master account, dubbed the 'skinny' master account, which would grant direct access to its wholesale payment and settlement services. The proposal aims to expedite the approval process for non-traditional firms, such as fintech and crypto companies, while maintaining safeguards against undue risk.

The Federal Reserve has faced criticism for its slow or unsuccessful application process for master accounts, which have led to a surge in applicants seeking bank charters. Currently, only three non-bank institutions have received master accounts since 2022, with several others facing rejection or pending applications.

The proposed 'skinny' account would have limited features compared to traditional master accounts, including no interest payments and no access to the Fed's cash, check, or automated clearinghouse services. The proposal has sparked debate among banking industry representatives and critics of crypto, with some arguing that access for non-traditional firms is inappropriate.