Federal Reserve ‘skinny master account’ proposal draws comments and clashes from crypto, community banks

Core Viewpoint - The Federal Reserve is proposing a "skinny master account" to provide limited access to its payment services for certain eligible institutions, sparking debate among crypto banks and community banks regarding the inclusion of nontraditional financial firms in the U.S. payment system [2][4]. Group 1: Proposed Master Account Features - A master account allows institutions direct access to the Fed's payment systems and the U.S. money supply, while those without it must rely on partner banks [3]. - The proposed skinny master account would not allow interest on balances and would have limitations on borrowing from the discount window, aiming to mitigate risks associated with nontraditional financial firms [4]. - Anchorage Digital Bank, the first federally chartered crypto bank, supports the initiative but highlights concerns regarding overnight balance limits on payment accounts [5]. Group 2: Concerns and Recommendations - The Federal Reserve is considering a cap of "$500 million or 10% of the Payment Account holder's total assets," which Anchorage argues is essential to remove or raise to avoid operational risks [6]. - The proposed cap could force institutions to sweep client funds to correspondent banks overnight, reintroducing credit and operational risks that the Payment Account aims to eliminate [7]. - The Blockchain Payment Consortium emphasizes the importance of access to central bank settlement systems for implementing the GENIUS Act, which regulates stablecoins at the federal level [7][8].