Fintechs Push Federal Reserve on Payment Account Plan That Could Curb Crypto Debanking

Fintech trade groups are urging the Federal Reserve to advance its Payment Account proposal, which would provide non-bank financial institutions direct access to core U.S. payment systems. The American Fintech Council, a leading advocate, argues that such access could enhance competition and innovation without increasing risk. "A well-designed payment account can expand competition and responsible innovation in payments without introducing new risk," Phil Goldfeder, CEO of the American Fintech Council, said.

The proposal would allow eligible firms to clear and settle payments directly using systems like Fedwire and FedNow. It would limit access to final-settlement capabilities, cap overnight balances, and exclude interest and discount window access. This is intended to avoid overextending the Fed's role while still opening the system to non-traditional players.

However, bank industry groups have raised concerns that the plan could undermine financial stability by enabling non-bank entities to operate outside traditional supervisory frameworks. They worry that stablecoin and crypto-linked models could mimic deposit-taking without the same safeguards, such as deposit insurance or consolidated oversight. These entities, they argue, could draw customer funds away from banks and raise systemic risks.

Why Did This Happen?

The Payment Account initiative is a response to longstanding calls from fintech and crypto firms for direct access to Fed infrastructure. Currently, non-bank entities must rely on sponsor banks, which increases costs, introduces counterparty risk, and limits competition. Fintech groups argue that this model stifles innovation and creates operational friction.

The Federal Reserve has been exploring the idea since 2024, when Governor Christopher Waller first proposed a "skinny" master account model. This approach would grant access to final-settlement systems but with limitations on balance caps, interest, and lending capabilities. The goal is to test whether non-banks can be safely integrated without exposing the Fed to undue risk.

How Did Markets React?

Industry responses have been mixed. The Blockchain Payments Consortium has welcomed the initiative, calling it an "overdue and much-welcomed addition" that would reduce risk concentration among a few large banks. Anchorage Digital Bank, the first federally chartered crypto bank, has also shown support but has flagged concerns about balance caps and access to the ACH system.

Conversely, major banking associations like the American Bankers Association have warned that non-bank entities are not subject to consistent federal safety and soundness standards. They argue that allowing such firms direct access to the Fed's balance sheet could expose the system to operational and compliance risks. Better Markets, a financial reform group, has called the proposal an "irresponsible and reckless giveaway to the crypto industry."

What Are Analysts Watching Next?

The Fed has not yet announced its final decision but has indicated it is considering feedback from stakeholders. The debate reflects broader tensions over the role of central banks in a rapidly evolving payments landscape. If the Payment Account is implemented, it could set a precedent for how the Fed treats non-banks in the future. It may also influence whether crypto firms gain a more formal presence in the U.S. financial infrastructure.

Regulators and industry groups are closely watching how the Fed balances innovation with stability. The outcome will likely shape the competitive landscape between banks, fintechs, and crypto players for years to come. Investors are advised to monitor further developments as they unfold in the coming months.