On Monday, the Federal Reserve published official guidelines for new financial organizations including crypto banks to access its ‘master accounts’ which are required to participate in the global payment system.
The ‘Final Guidance’ mentioned cryptocurrency custody banks when discussing novel institutions that may seek master accounts under these guidelines.
As per the guidelines, a tiered framework has been set up for organising applicant institutions depending on their apparent risk level. For instance, Tier-1 includes federally-insured applicants. Tier-2 consists of organisations that are not federally-insured but still are “subject to federal prudential supervision”.
Tier 3 includes institutions that are neither ‘federally-insured’ nor ‘subject to prudential supervision’, but are subject to a regulatory framework that is ‘substantially different from, and probably weaker than federally insured institutions’.
On the new guidelines, Fed vice chair Lael Brainard commented that it will offer a consistent and transparent process to assess requests for Fed Reserve accounts. The guidelines will also provide a transparent process for supporting a safe, inclusive, and innovative payment system.
Even though the Fed created a master account application framework that considers crypto companies, the Fed also warned against reading too far into it.
The Fed Reserve said that they do not establish legal eligibility norms but rather designed a risk-focused framework for estimating access requests from ‘legally eligible institutions under federal law’.
This statement was made while pointing out that regulations could cover services to novel institutions “that pose high levels of risk.”
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