Waller Floats ‘Payment Account’ Framework to Provide Crypto Firms Access To Fed’s Payment Rails

Federal Reserve Governor Chris Waller has floated the idea of a ‘Payment account’ framework that could benefit crypto firms focused on payments innovation. Waller made this revelation at the Federal Reserve payments conference, where he also signaled the U.S. central bank’s support for the crypto industry.

Waller Proposes Payment Account Idea At Federal Reserve Payments Conference

During his opening remarks at the conference, the Fed governor revealed that he has asked the staff to explore the idea of a ‘payment account,’ which he also referred to as a “skinny master account.” He indicated that this could have some characteristics of Fed master accounts, a move that could enable crypto firms to access the central bank’s payment rails without a banking license.

As CoinGape reported earlier, the Federal Reserve payments conference will focus on emerging technologies, including stablecoins, and their impact on the global payments landscape. Meanwhile, Waller mentioned that the payment account would be available to all institutions legally eligible for an account and could benefit those focused on payments innovation, including stablecoin issuers.

The Fed governor further explained that this payment account concept would aim to provide basic Fed payment services to legally eligible institutions that conduct payment services primarily through a third-party bank with a Fed master account. Notably, crypto firms like Ripple have already applied for a Fed master account to eliminate the need for a middleman to access the Fed’s payment rails.

Waller noted during his remarks at the Federal Reserve payments conference that many eligible firms engaged in substantial payments activities may not want or need all the “bells and whistles” of a master account or access to all the Fed’s financial services. As such, the payment account initiative might be a more suitable option for such firms, especially as it could eliminate the rigorous process of applying for a Fed master account.

The Fed governor mentioned that these lower-risk payment accounts would have a streamlined review timeline. “Payments innovation moves fast, and the Federal Reserve needs to keep up,” Waller added.

What The Payment Account Will Look Like

Waller further stated that the payment account would provide access to the Federal Reserve’s payment rails while mitigating risks to the Fed and the payment system. The Reserve Banks would not pay interest on balances in payment accounts, and balance caps may be imposed to control the size of the accounts and their associated impacts on the Fed’s balance sheets.

Meanwhile, the Fed governor also revealed at the Federal Reserve payments conference that these payment accounts would not have daylight overdraft privileges and that payments would be rejected if the balance hits zero. He added that these accounts will also not be eligible for the discount window or borrowing or have access to the Fed’s payment services, for which the Reserve Banks cannot control the risk of daylight overdrafts.

Waller said they will engage interested stakeholders to hear their perspectives on the benefits and drawbacks of this approach. This came as he noted that this is just a prototype idea of how things could change.