Fed Finalizes Guidelines for Crypto Banks Applying for Master Accounts

Fed Finalizes Guidelines for Crypto Banks Applying for Master Accounts

The Federal Reserve Bank is revealing the final rules that will guide how crypto banks can apply for and obtain master accounts.

A master account is the record of the account holder’s financial rights and obligations to the managing reserve bank.

The Federal Reserve bank says the level of scrutiny or due diligence master account applicants will be subjected to will depend on the degree of risk they pose.

“The new guidelines include a tiered review framework to provide additional clarity on the level of due diligence and scrutiny Reserve Banks will apply to different types of institutions with varying degrees of risk.

For example, institutions with federal deposit insurance would be subject to a more streamlined level of review, while institutions engaged in novel activities and for which the authorities are still developing appropriate regulatory and supervisory frameworks would be subject to a more simplified review. more extensive”.

According to the Federal Reserve Bank, master accounts are highly sought after by institutions that offer “new types of financial products” or those that have “novelty cards.”

“Institutions offering new types of financial products or with novel charters have grown in recent years and many have requested access to accounts, often referred to as ‘master accounts,’ and payment services offered by the Federal Reserve Banks.

The Reserve Banks will use the guidelines to assess those requests with a transparent and consistent set of factors.”

A member of the Board of Governors of the Federal Reserve System, Michelle Bowman, says there is a lot of work to be done before the guidelines are fully updated.

“However, these guidelines are only the first step in providing a transparent process.

More work remains to be completed before a process is established to fully implement the guidelines.

There is a risk that this post sets the expectation that reviews will now be completed on an accelerated schedule.”

The Federal Reserve guidelines come two months after Custodia, a crypto bank founded by former Wall Street executive and cryptocurrency advocate Caitlin Long, sued the US central bank for delays in approving its application for a master account.

Custodia claimed in the lawsuit filing in June that the Federal Reserve had delayed a decision on the application for more than 19 months.

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Featured Image: Shutterstock/BravissimoS/Nikelser Kate

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