Representative Maxine Waters, the ranking member on the House Financial Services Committee, has written to the Federal Reserve Bank of Kansas City inquiring about the limited purpose master account recently awarded to a state bank subsidiary of the Kraken crypto exchange. Her inquiries echo those of several bank industry bodies immediately after the award.
The banks and Waters argue that granting the account for one year comes before completion of the process under which the Federal Reserve is exploring cut down master accounts, what it calls payment accounts and what have been dubbed skinny accounts. From the Fed’s perspective, one of the objectives of the Kraken account is to use it as a pilot to explore how such an arrangement might work before finalizing skinny account rules. The pilot nature of the account was outlined during an interview with Federal Reserve Vice Chair Michelle Bowman, although she qualified her statements by noting that the skinny account concept is being driven by Governor Waller rather than herself.
Given the Kansas City Fed announcement was quite brief, Waters’ letter probes the activities permitted to Kraken Financial, which does not provide lending services and holds deposits one for one. Technically the account is a Tier 3 master account, which gives the central bank considerable discretion over which services are enabled. Waters wants to know to what extent the account is aligned with the request for information on skinny accounts, or whether it is broader.
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