The Federal Reserve Bank of Kansas City has granted Kraken Financial a limited-purpose master account, marking the first time a cryptocurrency firm gains direct access to the central bank's payment system. This approval allows Kraken to settle U.S. dollar transactions on Fedwire without intermediaries. The move comes amid a shifting regulatory landscape under the Trump administration but draws criticism from banking trade groups over potential risks.
On Wednesday, the Federal Reserve Bank of Kansas City approved a limited-purpose master account for Kraken Financial, a Wyoming-chartered special-purpose depository institution (SPDI) operated by Payward Ventures. This decision makes Kraken the first digital asset bank in U.S. history to connect directly to the Federal Reserve's payment infrastructure, including Fedwire. The account, granted for an initial one-year term, enables Kraken to move funds more efficiently, reducing costs and dependencies on correspondent banks.
Kraken co-CEO Arjun Sethi described the milestone in a statement: “This milestone marks the convergence of crypto infrastructure and sovereign financial rails. With a Federal Reserve master account, we can operate not as a peripheral participant in the U.S. banking system, but as a directly connected financial institution.” Sethi added that the full-reserve model of the SPDI charter provides a resilient foundation, allowing direct settlement on Fedwire and integration of regulated fiat liquidity into digital asset markets.
Kansas City Fed President Jeff Schmid noted that “the payments landscape is actively evolving,” emphasizing the priority of maintaining the integrity and stability of the U.S. payments system. The approval follows over five years of regulatory engagement since Kraken's application in October 2020 and aligns with recent pro-crypto developments, including the passage of the Genius Act and the installation of supportive federal regulators during the second Trump administration.
However, banking trade groups expressed strong concerns. Brooke Ybarra, senior vice president of innovation and strategy at the American Bankers Association, stated: “With so many related issues still unsettled, including final GENIUS Act rules and the development of a ‘skinny’ master account framework, we have serious questions about why regulators are granting access... This action puts the cart so far ahead, that the horse will never be able to catch up.”
Paige Pidano Paridon, co-head of regulatory affairs at the Bank Policy Institute, criticized the move for ignoring public comments on the 'skinny' account framework, which offers limited access without interest on balances, daylight overdrafts, or discount window privileges. She highlighted risks of illicit finance and systemic instability from granting uninsured firms access before final rules.
The approval contrasts with the experience of Custodia Bank, another Wyoming-chartered crypto firm that applied in the same month but was denied in early 2023, leading to ongoing litigation. Kraken, classified under the Fed's Tier 3 for strictest review, plans a phased rollout focused on institutional clients.
