Author: DLNews

Translation: Deep Tide TechFlow

Deep Tide Introduction: After Kraken secured a main account with the Federal Reserve, bank lobbying groups immediately jumped out to say this was a violation, lacked transparency, and bypassed the public comment process.

This is not just a regulatory controversy; it reflects the clash between the cryptocurrency industry and the $23 trillion traditional banking sector— the stablecoin interest rate battle is also brewing simultaneously.

The full text is as follows:

• Kraken has been approved for a Federal Reserve main account
• This is seen as a milestone for the long-suppressed cryptocurrency industry
• But bank lobbying groups are pushing back against this decision

After Kraken's main account application was approved by the Kansas City Fed, bank lobbying groups expressed "deep concerns."

This victory allows the cryptocurrency exchange to gain access to payment rails similar to those enjoyed by thousands of banks and credit unions.

"We are deeply concerned about the Kansas City Fed approving a 'limited purpose' main account application—seemingly a 'streamlined' account—at a time when the Fed Board has not completed the policy framework for such accounts," said Pagie Pidano-Parrington, co-director of regulatory affairs at the Bank Policy Institute, in a statement.

The advocacy group also condemned the Kansas City Fed's decision for ignoring public opinion, lacking in transparency, and claimed that this action "violates the Fed Board's own policy of seeking public input when making significant changes to the payment system."

For Wyoming Republican Senator and long-time cryptocurrency supporter Cynthia Lummis, this decision marks "a watershed moment."

Indeed, this occurs at a critical juncture where the cryptocurrency industry is confronting the U.S. banking sector—the former is gaining increasing legal and regulatory recognition, allowing it to invade territory traditionally belonging to the $23 trillion U.S. lending industry.

Kraken did not immediately respond to a request for comment.

A "Milestone"

Kraken celebrated the approval of its main account on Wednesday, which will enable the exchange to process transactions for large clients faster and more seamlessly. Kraken co-CEO Arjun Sethi told DL News in September that the company's goal is for institutional investors to account for one-third of revenue.

Although the company will not receive the full suite of services that banks enjoy at the central bank—for example, earning interest on reserves held at the Federal Reserve—this is still a significant victory for an industry long regarded as the "redheaded stepchild" of the financial sector.

"This milestone marks the integration of cryptocurrency infrastructure with the national financial rails," Sethi stated, "With a Federal Reserve main account, we can operate as a direct-access financial institution, no longer just as peripheral participants in the U.S. banking system."

Trump's pro-crypto policies have provided legitimacy for this industry. In the first year of his return to the Oval Office, the 79-year-old president rolled out a series of crypto-friendly executive orders, appointed industry allies to key government positions, supported looser regulations on the industry, and signed the landmark stablecoin bill GENIUS Act.

However, the GENIUS Act left a loophole that could allow cryptocurrency exchanges to pay clients interest on stablecoin holdings, which the banking industry strongly opposes, fearing it would drive customers away from traditional banks.

This week, Trump sided with the cryptocurrency industry in months-long disputes over stablecoin yields. This controversy has threatened the negotiation process of the CLARITY Act—the proposed U.S. cryptocurrency regulatory framework.

The banking sector has been lobbying lawmakers to include provisions in the CLARITY Act to close this so-called stablecoin interest loophole. Cryptocurrency companies have pushed back, criticizing the banking industry for trying to renegotiate terms more than six months after the signing of a law.