Karla Barker 
A New Approach to Banking Access
Federal Reserve Governor Christopher Waller has put forward an interesting idea that could change how crypto companies interact with the U.S. banking system. He suggested creating what he calls “skinny master accounts” – a limited version of the traditional master account system that would give crypto firms access to the Fed’s payment infrastructure without the full banking privileges.
This proposal comes at a time when companies like Custodia have been fighting for years to get direct access to the Federal Reserve’s payment rails. Currently, crypto firms need to work through intermediary banks, which adds layers of complexity and cost. Waller’s approach seems to acknowledge the growing importance of digital assets while maintaining what he calls “appropriate guardrails.”
How Skinny Accounts Would Work
The skinny master account would be quite different from traditional banking relationships. According to Waller’s remarks at the Fed’s Payments Innovation Conference, these accounts wouldn’t pay interest on balances, and there would likely be caps on how much money could be held. They also wouldn’t have daylight overdraft privileges – if the account hits zero, payments simply get rejected.
Perhaps most importantly, these accounts wouldn’t have access to the Fed’s discount window or the full range of payment services where the Fed can’t control overdraft risks. It’s a sort of middle ground that gives crypto firms what they need for payments while limiting the Fed’s exposure to potential risks.
Stablecoin Implications
This proposal could be particularly significant for stablecoin issuers. Linda Jeng from Digital Self Labs pointed out that payment stablecoin issuers already operate similarly to narrow banks – they hold fully-backed reserves and facilitate payments rather than making loans. Yet current legislation like the GENIUS Act doesn’t grant them direct access to Fed payment rails.
Waller’s idea would integrate these stablecoin issuers more directly into the U.S. monetary system. It would also give the Fed more tools to manage any systemic risks that might emerge from the stablecoin sector, which has been growing rapidly.
Global Competition and Dollar Defense
Former World Bank President David Malpass offered an interesting perspective, suggesting that this proposal could help “defend the dollar’s purchasing power.” He noted there’s a global competition for market share in stablecoins, and having U.S. dollar-backed stablecoins operating within the Federal Reserve system could strengthen the dollar’s position.
Waller was careful to emphasize that this is just a prototype idea at this stage. The Fed will be engaging with stakeholders to hear perspectives on both the benefits and drawbacks of this approach. He promised we’ll be hearing more about this shortly as Federal Reserve staff examine the concept.
This development represents a potentially significant shift in how regulators are thinking about integrating crypto into the traditional financial system. It’s not full acceptance, but it’s certainly more than the complete separation some had feared. The crypto industry will be watching closely as this proposal develops.