The Federal Reserve Board Seeks Public Comment on New Limited-Use Bank Payment Account
The Federal Reserve Board recently voted to seek public comment on a new, limited-use bank payment account that could be utilized by eligible banks and credit unions. This decision was announced in a press release from the central bank, which highlighted the purpose of the account for clearing and settling the institution’s payment activity. The board’s staff emphasized in a memo that the account would be a prototype tailored to the risks and needs of eligible institutions focused on payments innovation.
Federal Reserve Governor’s Perspective
Federal Reserve Governor Christopher Waller initiated the idea of exploring the creation of this limited-use payments account, which he referred to as a “skinny” account that would not provide all the benefits of current master accounts. Waller clarified that the account would only be available to financial institutions with a banking charter, excluding companies without access to Fed accounts.
Waller’s proposal aims to cater to emerging financial technology needs, limiting the risk taken on by the central bank for such purposes. He expressed a shift in the Fed’s perspective towards technologies like decentralized finance, indicating a more welcoming approach to innovation and disruption in the payments industry.
Industry Response and Criticisms
While some industry players have welcomed the Fed’s move towards payments innovation, others have raised concerns. The Federal Money Services Business Association, representing money transmitters in the payments sector, criticized the proposed account type for not addressing the broader industry’s need for access to Fed services. The organization highlighted the structural dependency of the industry on indirect settlement arrangements, which can be fragile and vulnerable to disruption.
President Donald Trump’s administration has also shown support for digital payments and assets, signaling a broader trend towards modernizing the federal government’s payments system and supporting stablecoins infrastructure.
As the industry continues to evolve, feedback from stakeholders and industry experts will play a crucial role in shaping the future of payment systems. The Fed’s initiative to seek public comment reflects a commitment to fostering innovation and addressing the evolving needs of financial institutions.
For more information on the Federal Reserve Board’s decision and industry reactions, you can refer to the source here.
