U.S. crypto banks may soon be able to serve crypto and fiat customers.
Crypto is edging closer to complete interconnectedness with the traditional finance sector after the Fed released new formal guidelines on Tuesday.
Crypto banks could soon be granted "master accounts" at the Fed, which would allow for direct payments with the central bank. That has been the standard for federally-chartered banks, but up to this point banks in the U.S. have had to choose whether they want to conduct crypto transactions or engage in traditional banking services.
Titled “Final Guidance,” the document left little doubt as to whom these new guidelines are targeting, even though cryptocurrency was mentioned only once.
Fed Vice Chair Lael Brainard commented:
"The new guidelines provide a consistent and transparent process to evaluate requests for Federal Reserve accounts and access to payment services in order to support a safe, inclusive, and innovative payment system."
The initial proposal in 2021 sketched out the same type of multi-tiered system that the Fed wants to implement now. Financial institutions will fall into different tiers, which differ according to how stringent their review process is.
Tier 1 banks would be federally insured, while tier 2 banks would be "subject to prudential supervision by a federal banking agency." Tier 3 banks would be "not federally insured and not subject to prudential supervision by a federal banking agency" and are likely crypto banks like Kraken.
The decision comes after Custodia, a crypto bank, sued the Fed in June based on delaying its master account application.
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