Fed Proposes ‘Skinny’ Payment Accounts for Crypto Banks

The proposed “payment account” is a carefully delineated financial instrument. As outlined by the Federal Reserve, it is explicitly not a master account, which is the gold standard required for a bank to operate fully at a national level. Instead, this new account type offers a restricted gateway. It would provide access to the Fed’s payment rails—the vital plumbing of the U.S. financial system that facilitates transactions and settlements—but with significant limitations. According to the Fed’s clarification, these accounts would not be interest-bearing, would have no access to Federal Reserve credit facilities, and would likely be subject to balance caps.

This structure is a direct response to the central bank’s longstanding concerns about financial stability. For years, the Fed has rejected applications from state-licensed crypto banks, most notably Custodia, for full master accounts. The denials were consistently based on the potential risks such approvals could pose to the broader U.S. banking system. The “skinny” account, as Governor Waller first termed it in October, is designed as a compromise. “These new payment accounts would support innovation while keeping the payments system safe,” Waller stated, framing the proposal as a way for the Fed to be “responsive to evolutions in how payments are made” without compromising its supervisory mandate.

The proposal arrives at a moment of potential transition for the Federal Reserve’s leadership and its philosophical approach to digital assets. The current Fed Chair, Jerome Powell, has presided over a period of cautious independence, repeatedly attracting criticism from President Donald Trump for not being more accommodating. Powell’s tenure has seen the Fed maintain its guard against granting crypto banks the full powers afforded to traditional major banks, even as the Trump administration has worked to eliminate other regulatory barriers between the traditional and crypto economies.

This dynamic may be poised to change. Governor Christopher Waller, the architect of the “skinny” account concept, is widely considered a top candidate to replace the outgoing Powell next year. The public rollout of this plan, complete with a 45-day comment period, allows Waller and other candidates to demonstrate alignment with the administration’s innovation-friendly agenda. The move signals a potential departure from the Fed’s role as the “last holdout of resistance” against integrating crypto banks into the core of the national financial infrastructure. A fast-tracked approval process for these payment accounts could, as the analysis suggests, “lead to an explosion of crypto banking in the United States.”

For crypto-native banks like Custodia, which have fought for years to gain a master account, the proposal is a double-edged sword. On one hand, it represents the first concrete opening from the Federal Reserve, offering a pathway to access essential payment rails and operate with greater efficiency on a national scale. This is a substantive shift from outright rejection to a structured, if limited, engagement.

On the other hand, the limitations are profound. Without the ability to offer interest or access Fed credit, these institutions would operate with a fundamental competitive disadvantage compared to traditional banks with full master accounts. The potential balance caps further constrain their operational scope. The success of this initiative will hinge on the details finalized after the public comment period and whether crypto banks view the trade-off—access in exchange for constraints—as a viable foundation for growth. The coming 45 days of feedback will be a critical barometer for the industry’s response and will shape the final rule, marking a key step in the ongoing evolution of the United States’ financial regulatory framework for digital assets.