Original Title: Banking lobby decries Kraken bagging "skinny" Federal Reserve account
Original Author: Eric Johansson, DLNews
Original Translation: Deep Tide TechFlow
Deep Tide Introduction: Kraken has obtained a Federal Reserve master account, and banking lobbyists immediately jumped out to say this is a violation, lacks transparency, and bypasses the public comment process.
This is not just a regulatory controversy; behind it is a reflection of the collision between the $23 trillion traditional banking industry and the cryptocurrency sector—the stablecoin interest rate dispute is also fermenting simultaneously.
The full text is as follows:
Kraken has been approved for a Federal Reserve master account, seen as a milestone for the previously long-suppressed cryptocurrency industry, but banking lobbyists are launching a counterattack against this decision. After the Kansas City Fed approved Kraken’s master account application, banking lobbyists expressed "deep concern."
This victory gives the cryptocurrency exchange access to the payment rails enjoyed by thousands of banks and credit unions.
"We are deeply concerned about the Kansas City Fed approving a 'limited purpose' master account application—appearing to be a 'skinny' account—at a time when the Fed Board has not yet completed its policy framework for such accounts," said Paige Pidano Paridon, 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 transparency, and stated that this move "violates the Fed Board's own policy of requiring public consultation when proposing significant changes to the payment system."
For Wyoming Republican Senator and long-time crypto supporter Cynthia Lummis, this decision marks "a watershed moment."
In fact, this occurs at a critical juncture where the cryptocurrency industry is clashing with the U.S. banking sector—the former is gaining increasing legal and regulatory recognition, thus encroaching on the 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 master account on Wednesday, which will allow the cryptocurrency exchange to process transactions for large clients more quickly and smoothly. 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 its revenue.
Although the company will not receive the full suite of services that banks enjoy at the central bank—such as earning interest on reserves held at the Fed—this is still a significant victory for an industry long regarded as the "rejected stepchild" of the financial sector.
"This milestone represents the convergence of crypto infrastructure with the national financial rails," Sethi stated in a release, "With a Federal Reserve master account, we can operate as a direct-access financial institution, no longer just a peripheral player in the U.S. banking system."
Trump's pro-crypto policies have provided a legitimacy endorsement 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 for the sector, and signed the landmark stablecoin legislation, the GENIUS Act.
However, the GENIUS Act left a loophole that could allow cryptocurrency exchanges to pay customers 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 for the CLARITY Act—the U.S. cryptocurrency regulatory framework draft.
The banking sector has been lobbying lawmakers to include provisions to close this so-called stablecoin interest loophole in the CLARITY Act. Crypto companies are pushing back, accusing the banking sector of trying to renegotiate terms of a bill more than six months after its enactment.
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