Federal Reserve 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 get master accounts.

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

The Federal Reserve bank says that the level of scrutiny or due diligence that the applicants for master accounts 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 that 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 that engage in novel activities and for which authorities are still developing appropriate supervisory and regulatory frameworks would undergo a more extensive review.”

According to the Federal Reserve Bank, master accounts are much sought-after by institutions providing “new types of financial products” or those possessing “novel charters.”

“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 Federal Reserve Banks.

The guidelines will be used by Reserve Banks to evaluate 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 that there remains a lot of work to be done before the guidelines are fully actualized.

“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 publication could set the expectation that reviews will now be completed on an accelerated timeline.”

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

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

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