The US Federal Reserve advanced a regulatory framework on Wednesday proposing limited payment accounts designed to grant legally eligible fintech and crypto-linked banks narrower access to its payment infrastructure. This initiative, released via a Board request for comment and notice of proposed rulemaking, explicitly targets "skinny master accounts" for nonbank financial institutions that lack the full backstops available to traditional depository institutions.

Concurrently, the central bank directed regional Reserve Banks to suspend decisions on pending Tier 3 account-access requests until the rulemaking process concludes, a timeline staff projects will end by Dec 31 2026. The announcement stated that this temporary pause is necessary to solicit public input and ensure consistent implementation across the system.

This regulatory maneuver underscores the persistent tension between expanding digital asset integration and maintaining systemic stability, particularly following President Donald Trump's executive order advocating for broader fintech inclusion. While political pressure mounts for direct access, the Fed maintains a cautious posture, expecting the moratorium on Tier 3 master account applications to remain in effect until at least Dec 31. A Board memo released alongside the proposal detailed a list of pending account requests from Tier 3 institutions as of Feb 28 2026. Data compiled by Woofun AI indicates that this list included Kraken Financial, the banking arm of the cryptocurrency exchange Kraken, which had previously sought direct connectivity to the US payment rails.

Despite the pending status of several applications, the regulatory landscape has already seen selective movement. Kraken was subsequently granted a limited-purpose master account by the US Federal Reserve Bank of Kansas City in early March 2026, with the bank approving the access specifically under a Tier 3 classification. This approval highlights the industry's long-standing pursuit of Fed master accounts as a mechanism to connect more directly to the US payment system.

However, the latest proposal clarifies that crypto exchanges will not receive direct access to these master accounts, even amidst broader political support for expanding digital asset integration into the financial system.

According to Eleanor Terrett, firms must instead operate through an affiliate that qualifies as an eligible depository institution under the Federal Reserve Act to secure such access. The concept of "skinny" payment accounts was initially introduced in October by Federal Reserve Governor Christopher Waller and has since been refined through policy discussions in early 2026. Unlike full master accounts, these proposed payment accounts would be strictly limited to clearing and settlement functions. Woofun AI notes that these restricted accounts would not earn interest nor provide access to critical central banking tools such as the discount window or intraday credit facilities.

The structural limitations of these new accounts represent a deliberate compromise, offering a pathway for nonbanks to participate in payment clearing without exposing the central bank to the full spectrum of risks associated with traditional banking relationships. This approach attempts to reconcile the executive branch's push for innovation with the central bank's mandate for financial stability. As the rulemaking proceeds, the distinction between full master accounts and these limited payment accounts will likely define the operational boundaries for crypto-linked entities in the US financial ecosystem.

Looking ahead, the expiration of the pause on Dec 31 2026 will serve as a critical juncture for the industry. If the final rules maintain the current restrictions, crypto firms will continue to rely on affiliate structures rather than direct Fed access. Woofun AI analysis suggests that this regulatory path will force a bifurcation in the market, where only those with robust banking affiliations can navigate the payment rails, while others remain dependent on intermediaries. The outcome will ultimately determine the degree of autonomy digital asset firms possess within the core US payment infrastructure.