Kraken was granted a master account Wednesday by the Federal Reserve Bank of Kansas City, marking the first time a cryptocurrency firm has gained access to the central bank’s payment system.
Payward Ventures, which is chartered in Wyoming as a special-purpose depository institution and does business as Kraken Financial, will now be able to move money on the same rails banks and credit unions use.
The rails give Kraken faster and more efficient movement while reducing the complexity and cost of moving money, the firm said.
“This milestone marks the convergence of crypto infrastructure and sovereign financial rails,” Kraken co-CEO Arjun Sethi said in a prepared statement Wednesday. “With a Federal Reserve master account, we can operate not as a peripheral participant in the U.S. banking system, but as a directly connected financial institution.”
The Kansas City Fed approved Kraken’s account for an initial term of one year.
Kansas City Fed President Jeff Schmid said Wednesday that “[t]he payments landscape is actively evolving,” and “[t]hroughout this transformation, the integrity and stability of the U.S. payments system remain our priority.”
Crypto-involved firms have wanted Fed master accounts for several years with one, fellow Wyoming-chartered lender Custodia Bank, even suing the central bank in pursuit of master account access.
Kraken’s master account approval comes, too, as digital assets gain access to the financial mainstream, following the passing of the Genius Act and installation of several pro-crypto federal financial regulators during the second Trump administration.
“For a Wyoming SPDI structured on a full-reserve model, this creates a uniquely resilient foundation,” Sethi said of Kraken’s master account. “It gives us the ability to settle directly on Fedwire, reduce dependency on correspondent banks, and integrate regulated fiat liquidity directly into digital asset markets.”
In 2022, the Fed introduced a tiered system for master accounts. Kraken is in Tier 3, meaning it’s subject to the Fed’s strictest level of review.
Last year, Fed Gov. Christopher Waller floated the idea of a “skinny” account, offering a brand of limited access to Fed rails, envisioned as best suited for fintechs. A subsequent December proposal was both celebrated by some fintechs and derided by others as too restrictive.
Bank trade groups, however, expressed concern Wednesday about the timeline of Kraken’s award amid greater regulatory developments.
“With so many related issues still unsettled, including final GENIUS Act rules and the development of a ‘skinny’ master account framework, we have serious questions about why regulators are granting access to the Fed payment system and charters before completing the public notice and comment process that will inform any official guidance,” said Brooke Ybarra, the American Bankers Association’s senior vice president of innovation and strategy, in an emailed statement.
“This action puts the cart so far ahead, that the horse will never be able to catch up,” Ybarra said.
Paige Pidano Paridon, co-head of regulatory affairs at the Bank Policy Institute, alleged that by issuing Kraken a master account, which she said “appears to be a ‘skinny’ account,” the Fed is ignoring public comment sought on “skinny” account framework and issued Kraken’s “with no transparency into the process for approval or the risk mitigants that have been imposed to address the very significant risks it raises.”
Kraken’s master account approval follows more than five years of regulatory engagement, examination and scrutiny, according to the crypto firm’s blog post.
