Ripple, Coinbase, and Circle are the most direct beneficiaries of this policy relaxation.

Written by: Oluwapelumi Adejumo

Translated by: Luffy, Foresight News

U.S. President Trump has officially pressured the Federal Reserve to reconsider the highly controversial entry rules in the U.S. financial sector, escalating the industry game around whether cryptocurrency firms and fintech companies can directly connect to the central bank's payment system.

On May 19, Trump signed an executive order requesting the Federal Reserve to evaluate its policy on granting access to payment accounts for non-bank financial companies, including those engaged in digital assets, blockchain services, and other fintech businesses.

This executive order, titled "Incorporating Financial Technology Innovation into the Regulatory Framework," requires major federal regulatory agencies to review existing rules and eliminate redundant regulatory provisions that hinder financial innovation.

The order does not immediately grant cryptocurrency firms the authority to directly connect to the Federal Reserve’s payment channels; however, it clearly empowers the Federal Reserve to examine whether existing laws allow broader access, and if so, define the application process.

The outcome of this review is crucial, as it will directly determine whether companies like Kraken, Ripple, Coinbase, Circle, Anchorage, Wise, Paxos, and BitGo can reduce their reliance on intermediary banks and further approach the core financial infrastructure for USD large-value clearing.

The Opening of the Federal Reserve Master Account Marks a Policy Shift

The core target of this executive order is the Federal Reserve master account. Institutions holding this account can directly use the full suite of Federal Reserve payment services, including the Fedwire system for interbank large dollar transfers.

According to the Federal Reserve's current rules, these accounts are generally only open to deposit-taking banks. As a result, many cryptocurrency firms can only apply for special purpose bank charters or national trust bank charters to seek direct connection qualifications.

Trump's order requires the Federal Reserve to comprehensively reassess the entry rules for central bank payment accounts, while also clarifying whether the 12 regional Federal Reserves have the legal authority to independently approve or reject institutional account applications.

In March of this year, the Kansas City Federal Reserve took the lead in granting a restrictive special payment account to Kraken's parent company, Payward, becoming the first precedent in the industry, making this topic of authority expansion even more urgent.

Additionally, the order requires regulators to comprehensively investigate barriers to the development of the fintech industry, covering licensing approval rules, third-party risk management guidelines, and policies restricting cross-industry collaboration between banks and tech firms.

U.S. Senator Cynthia Lummis remarked that the new policy is a correction to the long-standing restrictions on entry in the fintech industry. Traditional institutions enjoy exclusive access to core payment channel resources, while emerging tech firms have long been marginalized. This order aims to create a fair competitive environment, stimulate industry vitality, and lower public payment costs.

Coinbase's Chief Legal Officer Paul Grewal also expressed support for this move, believing that current payment entry rules and third-party risk control guidelines are outdated, favoring traditional financial giants and inhibiting industry innovation, necessitating a rule reform in the regulatory sphere.

This also highlights the common demand in the cryptocurrency industry: the ability to access the central bank's core payment network has become a competitive barrier for industry development. Firms unable to connect directly must rely on banks for transfers, which not only increases operational costs and delays clearing efficiency but also exposes them to the operational risks of partner banks.

Kraken Provides a Viable Model for Cryptocurrency Companies

Kraken has provided the industry with a practical example of expanding access. In March of this year, the Kansas City Federal Reserve granted a special account qualification to its financial business entity, Kraken Financial, allowing access to the core payment channel for large dollar clearing, helping the platform process institutional user deposit and withdrawal operations more efficiently, especially facilitating the rapid flow of large funds among trading platforms, custodians, and partner banks.

However, this account authority comes with clear restrictions: it cannot enjoy all the financial services of a regular insured bank, does not accrue interest on required reserves, and cannot utilize Federal Reserve credit tools.

This type of restrictive design can both reduce systemic risk to the central bank and allow cryptocurrency firms to connect moderately with mainstream payment infrastructure, likely becoming a universal template that regulators may promote in the future. This would mean allowing firms access to dollar transfer clearing while strictly blocking sensitive financial permissions such as overdrafts, interest on reserves, and emergency liquidity assistance.

Custodia Bank CEO Caitlin Long welcomed this new policy. The institution has been striving to connect to the Federal Reserve system for years but was rejected in 2023, when the Federal Reserve determined that its cryptocurrency asset-focused business model did not meet legal entry requirements, confirming the significant difficulty for licensed cryptocurrency institutions to fully integrate into the central bank system.

The implementation of Kraken's restrictive account completely changed the regulatory attitude. Regulation no longer has just two options of "full opening" or "complete rejection," but can adopt a tiered authority model that gradually guides cryptocurrency firms into the mainstream payment system while reinforcing the bottom line of risk control.

Ripple, Coinbase, and Circle are Ready for the Next Phase

Ripple, Coinbase, and Circle are the most direct beneficiaries of this policy relaxation. Ripple has long submitted an application for a Federal Reserve master account, actively supporting the promotion of a lightweight restrictive account mechanism, allowing non-bank institutions to easily access basic payment services while not infringing upon the central bank's core financial permissions.

If successfully implemented, this will greatly promote its RLUSD stablecoin business, achieving efficient operation of reserve fund allocation and user redemption processes. For stablecoin issuers, the efficiency of reserve fund clearing and the stability of capital payout directly determine market confidence; direct or restrictive access to Federal Reserve accounts can significantly free them from the constraints of banking intermediaries, allowing for more flexible management of dollar liquidity during concentrated redemptions and periods of market volatility.

Coinbase and Circle, relying on the USDC stablecoin business and their own payment ecosystems, also have a strong need for access. Both institutions have established a federal trust bank structure, which further integrates them into the federal regulatory system and paves the way for applying for Federal Reserve payment accounts.

At the same time, other companies are also waiting in line. Anchorage Digital is already a federally chartered cryptocurrency bank; Paxos, BitGo, and Fidelity Digital Assets have also successively obtained related qualifications from the Office of the Comptroller of the Currency. Although these qualifications do not directly convert to Federal Reserve payment account privileges, they significantly bring these companies closer to compliance entry standards.

The actual demand in the industry is clear: cryptocurrency exchanges seek rapid fiat clearing, stablecoin issuers want to maintain independent control of reserve funds, asset custody institutions aim to optimize the efficiency of institutional client fund circulation, and payment companies are eager to break free from heavy reliance on cross-border clearing banks.

Galaxy Digital's research director Alex Thorn stated plainly that it is not only deposit-taking lending banks that qualify to conduct wire transfer business; this is simply a regulatory threshold established by modern regulations and not an immutable criterion in the financial industry. With multiple forces competing to enter the market, traditional banks are essentially trying to maintain their monopoly in the payment industry. The common view in the industry is that access qualifications for payment channels should be determined based on a company's business attributes, compliance regulatory strength, and risk control capabilities, rather than rigidly adhering to traditional banking business models.

Traditional Banks Warn: Entry Must Meet Banking-Level Standards

In response to the industry's call for openness, the American Bankers Association has clearly stated its opposition. The association believes that any institution engaging in banking-like operations must adhere to the same rigorous regulatory standards and consumer protection rules as traditional banks.

Rob Nichols, CEO of the Bankers Association, publicly stated: "If we cannot achieve a uniformly high standard of regulation across the industry, the entire financial system and ordinary consumers will face risks. In response to this Executive Order on Financial Innovation from the White House, we urge regulatory agencies to uphold the safety and stability of the financial system while promoting innovation and not to relax entry thresholds."

This is also the core concern of the banking community. Direct access to the Federal Reserve payment system is not merely a matter of business privileges; it comes with stringent regulatory frameworks, deposit insurance systems, capital adequacy assessments, liquidity control, and regular business reviews. In the view of banks, merely holding a lightweight license and having a limited business scope means that crypto firms, lacking equivalent compliance obligations and risk control capabilities, can easily introduce systemic risks into the core payment network.

The Federal Reserve’s wire transfer system is the core hub for global dollar clearing. Should an institution connected to it experience a cyber attack, operational failure, compliance loophole, or liquidity crisis, the impact of the resulting disruption in clearing will far exceed that of the firm’s own business scope. At the same time, banks incur significant costs in compliance areas such as anti-money laundering, monitoring user funds, and reporting suspicious transactions, and regulators must confirm that cryptocurrency firms possess equivalent compliance capabilities before allowing them to engage in diversified businesses such as trading, asset custody, stablecoin issuance, and payments.

Liquidity diversion is also a significant concern for banks. If stablecoin issuers and fintech companies can efficiently retain and allocate funds using the Federal Reserve system, it is highly likely that they will divert existing funds within the traditional banking system.

The restrictive account rules proposed by the Federal Reserve relieve some of these concerns by removing interest, credit, and other rights; however, the banking sector still will not easily consent to this transformation in industry landscape.

Although specialized restrictive accounts can mitigate most risks through privilege segmentation, they also create a new regulatory question: after obtaining a certain amount of payment business privileges, to what extent does a non-bank institution's business attribute equal that of a formal bank? This will become the core point of contention in defining entry boundaries in future regulatory discussions.