U.S. President Donald Trump signed an executive order on Tuesday, calling on regulatory bodies and the Federal Reserve to examine rules that may stifle financial innovation. This includes considering whether the Fed can expand financial technology companies' access to its payment channels, specifically the interbank funds transfer system.
The order mandates the Federal Reserve, in collaboration with other regulators, to review relevant policies to update them in support of fintech development. It also urges the Fed to assess how it grants access to payment accounts and services and to explore ways to broaden access for fintech firms and other non-bank institutions.
The issue of non-traditional financial institutions gaining access to so-called "master accounts" has garnered increasing attention from the Federal Reserve. Several fintech companies have already applied or plan to apply for such accounts. A Federal Reserve master account is often likened to a bank's bank account, allowing the holder to transfer funds directly through the Fed's payment systems.
Cryptocurrency exchange Kraken secured a Federal Reserve master account in March this year, enabling it to connect to the Fed's wholesale payment system, Fedwire, and hold limited overnight balances. Public information indicates that cryptocurrency firms Ripple and Anchorage Digital, along with fintech remittance company Wise, also seek to obtain master accounts.
The Federal Reserve had previously indicated its intention to open its payment channels to more cryptocurrency and fintech companies. In December of last year, the Fed solicited feedback on a potential new type of payment account with restrictions similar to those placed on the Kraken account.
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