Overview
While speaking at the Federal Reserve (Fed) Board of Governors' (FRB) first "Payments Innovation Conference," Fed Governor Christopher J. Waller proposed the creation of a specialized "payment account" concept that would provide limited access to the Fed's financial services, which he also called a "'skinny' master account."1 While the concept is only a "prototype," its implementation could expand access to some of the Fed's financial services for crypto payment companies and other companies innovating in the payments space.2
Background
An institution seeking to access the Fed's financial services, including wholesale payment systems (but not including the Fed discount window), must obtain a "master account."3 According to the FRB's 2022 "Guidelines for Evaluation Account and Services Requests," however, "only those entities that are member banks or meet the definition of a depository institution under section 19(b) of the Federal Reserve Act are legally eligible to obtain Fed accounts and financial services."4
Such eligible institutions must also meet other requirements under the FRB's guidelines, such as maintenance of an effective risk management framework and "sufficient liquid resources to meet its obligations to the Reserve Bank . . . ."5 Furthermore, some "nontraditional" eligible institutions, such as "a fintech payment company with a state bank trust charter" and a "state-chartered special purpose bank specializing in cryptocurrency services," have experienced denials, extensive delays, and/or heightened attention of their requests for a master account.6 Accordingly, some legally eligible institutions partner with third-party banks with master accounts.
Governor Waller stated that the Payments Innovation Conference would "focus on private-sector-driven innovation."7He highlighted private-sector firms engaged in payments innovation, including "banks, asset managers, retail payments firms, technology companies, as well as crypto-native fintechs," and acknowledged "that distributed ledgers and crypto-assets are no longer on the fringes but increasingly are woven into the fabric of the payment and financial systems."8 Acknowledging the Fed's role in supporting private-sector innovations in the payments space, he then asserted that the Fed "can and should do more to support those actively transforming the payment system."9It is "to that end" that Governor Waller "asked Fed staff to explore the idea of . . . a ‘payment account.'"10
Overview
The "payment account" would provide "basic Fed payment services to legally eligible institutions that right now conduct payment services primarily through a third-party bank that has a full-fledged master account."11 For Governor Waller, the main priority would be to provide services tailored to the needs of payments innovators who "may not want or need all the bells and whistles of a master account, or access to the full suite of Fed financial services."12
Importantly, the new payment accounts "would have a streamlined timeline for review," presumably faster and less burdensome than the process for acquiring a master account.13
Governor Waller described the features of a "prototype" payment account. Such an account would:
- Provide access to Fed payment rails;
- Not pay interest on balances;
- Possibly include imposed balance caps;
- Not have daylight overdraft privileges;
- Not be eligible for discount window borrowing; and
- Not have access to all Fed payment services for which the Reserve Banks cannot control the risk of daylight overdrafts.14
Governor Waller did not exhaustively list all of the Fed's financial services which would be available or unavailable to holders of these payment accounts, nor did he provide a timeline or estimate for when the FRB might propose the payment account concept. However, he claimed that, as Fed staff reviews the concept, they "will engage with all interested stakeholders to hear perspectives on the benefits and drawbacks to this approach" and that the public "will be hearing more about this shortly."15
Takeaways
The "payment account," as proposed and described by Governor Waller, could open doors to master accounts for eligible institutions—like those specializing in digital assets—that have nevertheless been denied direct access to the Fed's services.16 Governor Waller made clear that this proposal was meant to "support those actively transforming the payments system."17
The specific "basic Federal Reserve payment services" that the new payment accounts would provide are not fully defined.18 But these are likely the details about which Fed staff will likely engage with market participants and interested stakeholders. While the timeline for when the FRB may engage with the public on this proposal remains unclear, interested firms should consider preparing to communicate with the FRB over the specific features, limitations, and process related to the "payment account" concept. The formal proposal will likely involve an open comment period, and the idea may be raised at other future Fed events before then. Steptoe will continue to provide updates on the proposal as details emerge.
1 Christopher J. Waller, Speech: Embracing New Technologies and Players in Payments, Board of Governors of the Federal Reserve System (Oct. 21, 2025), https://www.federalreserve.gov/newsevents/speech/waller20251021a.htm.
3 See Congressional Research Service, Federal Reserve: Master Accounts and the Payment System at 1, (2022), https://www.congress.gov/crs_external_products/IN/PDF/IN12031/IN12031.3.pdf.
6 Congressional Research Service, supra note 3, at 2.
7 Waller, supra note 7.
8 Id.
10 Id.
14 See id.
15 Id.
16Steptoe represents Custodia Bank, an eligible depository institution, in its litigation against the Fed following the Fed's denial of a master account to Custodia. See Custodia Bank v. Fed. Reserve Bd. of Governors et al., No. 24-8024 (11th Cir.).
17Id.
18Id.
