Fed Proposal to Open Limited Accounts to Fintechs Draws Divided Industry Feedback

The Federal Reserve’s proposal to create narrowly scoped payment accounts for nonbank fintechs has prompted a compact but sharp debate among industry participants. Regulators asked for comment and documented 44 submissions, revealing a split between crypto-aligned firms that see the accounts as an enabling infrastructure change and traditional banking organizations that caution against loosening access to central bank plumbing. Proponents argue that giving select firms a direct rail—subject to limits—would reduce friction in retail and cross-border transfers and align with recent legislative efforts to modernize payments. Opponents counter that many eligible entities lack a long track record under consistent federal supervision and that entry could concentrate novel risks within the Fed’s balance-sheet perimeter. The draft rule proposes clear constraints: account holders would not draw interest on balances, would be excluded from Fed credit windows, and would face an overnight cap set at the smaller of a fixed dollar threshold or a proportion of the firm’s assets. Supporters from stablecoin issuers and a newly formed blockchain payments group framed the accounts as a remedy for competitive bottlenecks that favor legacy banks. Several entrant banks and crypto-focused institutions welcomed the concept while flagging operational gaps—around intraday limits, reserve options, and clearing access—that they want fixed. Banking trade associations pushed back vigorously, urging higher governance and proven supervisory history as prerequisites for access. A financial reform group labeled the idea an unnecessary expansion of the Fed’s role and warned of systemic exposures if controls are insufficient. The central bank has not committed to a timetable; officials indicated they will weigh the comments and that any final rulemaking may stretch over months. The debate crystallizes broader tensions: how to modernize payment rails without diluting prudential safeguards, and who should control access to the Fed’s core services. If finalized in anything like its current form, the rule would reshape how some payment firms interface with liquidity and settlement, but its long-term impact depends on implementation details and supervisory backstops. For market participants the immediate takeaway is that the Fed is serious about experimenting with access models, but the shape of that experiment remains contingent and contested.