According to the Wall Street Journal, the cryptocurrency exchange Kraken has received approval for its ‘master account’ with the US Federal Reserve.
Accordingly, Kraken, the second-largest cryptocurrency exchange in the US, achieved something no other cryptocurrency company had ever done before: gaining access to the FED.
At this point, Kraken became the first cryptocurrency company to gain access to the Fed’s core payment system, thus announcing that it could transfer money through the same payment channels used by thousands of US banks and credit unions.
This account gives Kraken direct access to the Fed’s payment channels, but not to the Fed’s credit facilities. Therefore, Kraken does not become a bank with this approval.
According to the limited-purpose or “narrow scope” master account framework proposed by Federal Reserve Board member Christopher Waller, a company can hold reserves and make payments with central bank money, but cannot lend money, access the Fed’s interest rate facilities, or operate as a traditional commercial bank.
At this point, according to sources, the Kraken endorsement was designed as a “pilot” program to test the narrow scope of the master account concept.
This situation could lead to an increase in FED master account applications from other cryptocurrency companies as well. Besides Kraken, Wyoming-based Custodia Bank, Anchorage Bank, and Ripple, which have long sought FED access and have been suing the FED since 2022, have also applied for master accounts.
Wyoming Republican Senator Cynthia Lummis described this move as a historic milestone for cryptocurrencies.
*This is not investment advice.