Key Highlights
- Legal & Transparency Concerns: Maxine Waters questioned the legal basis of Kraken’s “limited-purpose” Fed account, noting no clear backing in federal law or Federal Reserve guidelines.
- Scope of Access Under Scrutiny: The letter seeks clarity on whether Kraken can use critical Fed services like FedACH, Fedwire, or FedCash, and how extensive its access really is.
- Regulatory Oversight & Deadline: Waters is probing whether the approval involved coordination with the Federal Reserve Board or other regulators, with a response deadline set for April 10, 2026.
Congresswoman Maxine Waters (D-CA), the ranking Democrat on the House Financial Services Committee, is pressing the Federal Reserve Bank of Kansas City for answers after it approved a so-called “limited purpose account” for Payward Financial, doing business as Kraken Financial, earlier this month.
In a letter sent Thursday to Kansas City Fed President and CEO Jeff Schmid, Waters raised concerns about the transparency, legal grounding, and regulatory implications of the decision. The move made Kraken the first crypto firm in U.S. history to gain direct access to the Federal Reserve’s core payment infrastructure.
What is the concern
Waters’ central issue is that the term “limited purpose account” does not appear in any federal statute or in the Federal Reserve Board’s Account Access Guidelines. That, she argues, raises questions about whether the approval has a clear legal foundation.
“Innovations in payments, digital assets, tokenization, and even artificial intelligence are rapidly outpacing statutory frameworks developed to mitigate risk, promote competition, and protect consumers in a traditional financial environment,” Waters wrote in the letter.
She added that access to the nation’s core payments infrastructure carries significant public responsibility and should not be extended without full transparency and confidence that risks are being properly managed.
Waters also flagged that the Kansas City Fed’s own announcement stated it would not disclose specific details about the account, citing “the confidentiality of business information provided by applicants.”
What Waters is asking for
The letter lays out a detailed list of questions. Waters wants to know whether Kraken’s account includes access to key Federal Reserve services such as FedACH, Fedwire, FedCash, or Fedwire Securities Services.
She is also asking whether the account is subject to any restrictions on daylight overdrafts, overnight balance caps, or enhanced supervisory and risk-management requirements beyond what Wyoming state law already mandates.
Beyond that, Waters wants clarity on whether the Kansas City Fed coordinated with the Federal Reserve Board, other Reserve Banks, or any federal or state government officials before approving the account. She also asked whether any outside influence played a role in the decision.
The letter requests a written response no later than April 10, 2026.
What led to this
The Kansas City Fed announced on March 4 that it had approved a limited-purpose account for Kraken Financial under the Federal Reserve Board of Governors’ Account Access Guidelines. Kraken Financial is chartered as a Wyoming Special Purpose Depository Institution (SPDI) and was classified as a Tier 3 entity, meaning it went through the Fed’s strictest level of review.
The account has been approved for an initial term of one year with restrictions tailored to Kraken’s business model and risk profile.
Kansas City Fed President Jeff Schmid said at the time that the payments landscape is actively evolving, adding that “the integrity and stability of the U.S. payments system remain our priority.”
Kraken Co-CEO Arjun Sethi called the approval a milestone, saying it represents “the convergence of crypto infrastructure and sovereign financial rails.” He noted that the account allows Kraken to settle directly on Fedwire, reduce its reliance on correspondent banks, and integrate regulated fiat liquidity into digital asset markets.
The approval also drew strong reactions from the banking industry. The Bank Policy Institute said it was “deeply concerned” that the Kansas City Fed moved ahead before the Federal Reserve Board finalized its broader policy framework for limited accounts. The American Bankers Association also pushed back, with SVP Brooke Ybarra saying the decision “puts the cart so far ahead, that the horse will never be able to catch up.”
On the other side, crypto advocates and Wyoming officials celebrated the move. Senator Cynthia Lummis called it “a watershed moment for the digital asset industry,” and Wyoming Governor Mark Gordon said the approval “signals support for Wyoming’s banking and digital asset laws.”
Why this matters
The approval came at a time when Congress had been actively debating who should get access to the Federal Reserve’s payment rails and on what terms. The Federal Reserve Board itself requested public input in December 2025 on creating a more limited “payment account” for certain institutions, and the comment period closed in February 2026.
The fact that the Kansas City Fed approved Kraken’s account before that broader rulemaking process was completed is a key part of the criticism from both Waters and banking trade groups.
Other crypto firms are also in line for similar access. Custodia Bank, another Wyoming-chartered institution, had its master account application denied by the Kansas City Fed in early 2023. A federal appeals court recently rejected Custodia’s final bid to challenge that denial, even as the landscape for crypto access to the Fed appears to be shifting.
Ripple’s Standard Custody & Trust Company and Anchorage Digital Bank have also applied for Fed master accounts.
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