The U.S. Federal Reserve has advanced its regulatory framework by launching a formal comment period for limited payment accounts designed to offer a streamlined version of master-account services to non-bank entities. This initiative, announced in a Wednesday statement, aims to enable firms with diverse business models to clear and settle payments more efficiently, reducing costs and increasing speed without granting full master-account status. The central bank, which oversees member banks, previously issued a request for information in December to develop this concept, initiating an initial 45-day feedback loop. The current proposal remains substantially similar to the prototype outlined during that earlier phase, signaling a consistent strategic direction despite evolving market demands.

Access to the Federal Reserve's payment rails has long been a primary objective for the crypto sector, with the earlier iteration of this proposal frequently termed "skinny" accounts. Under the new terms, payment account holders will be explicitly barred from accessing intraday credit or the discount window, and they will not earn interest on balances held at a Reserve Bank.

Furthermore, access to payment services will be strictly governed by automated controls designed to prevent overdrafts, ensuring that liquidity risks remain contained within predefined parameters. Woofun AI reports that these structural limitations are intended to balance innovation with the preservation of financial stability.

In response to feedback received since December, the Federal Reserve has modified specific components of the original concept.

Notably, the proposal now stipulates that closing balance limits will be calculated based on an institution's expected payment activity, and the maximum allowable closing balance has been increased. This adjustment addresses previous concerns regarding operational flexibility while maintaining rigorous oversight. Data compiled by Woofun AI indicates that these recalibrated limits are critical for enabling high-volume settlement activities typical of digital asset firms without exposing the central bank to undue credit risk.

Contextualizing this regulatory shift, Kraken became the first crypto bank to secure a limited master account in March, although this access was granted by the Federal Reserve Bank of Kansas City rather than through a federal rule established by the Fed board in Washington. The Federal Reserve has subsequently instructed regional banks to pause consideration of certain applications while the board finalizes the overarching rule. This move underscores the central bank's intent to standardize access criteria across all 12 regional entities before further approvals are processed.

Concurrently, President Donald Trump issued an executive order just one day prior to the Fed's announcement, directing the central bank to review its protocols for granting uninsured depository institutions and non-bank financial firms access to payment accounts and services. The order specifically requested an examination of the 12 regional Fed banks acting independently of the board to establish payment accounts, highlighting a broader political push for clarity in the regulatory landscape. Woofun AI analysis suggests that the convergence of this executive directive and the Fed's rulemaking process will likely accelerate the standardization of access pathways for digital asset infrastructure providers.