In May the Federal Reserve consulted on so-called “Skinny” Payment Accounts, a cut down version of master accounts which is highly relevant for digital asset firms. In the past few days two responses were submitted by groups of banking associations, each with a different emphasis. Both seek safeguards and look to limit the scope of Payment Accounts. A push for the Fed to publish its interpretation of which institutions are legally eligible could create challenges.
The proposed Payment Account structure enables access to certain payment systems, but comes with safeguards so it does not allow overdrafts or interest, and limits overnight balances.
The rationale behind the new account is that “Tier 3” banks which are supposedly eligible for Master Accounts were rarely granted them. In Fed Vice Chair Bowman’s words, for this category of applicant a Master Account approval has been “unobtanium”. Tier 3 banks are not federally insured. Additionally, either the bank itself has no federal supervisor, or its parent company is not overseen by the Fed. While one might think the numerous recent OCC national trust charter applications are for federally supervised institutions, they would be classed as Tier 3 unless their holding company is also subject to Federal Reserve oversight.
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