The US Federal Reserve has proposed a limited “skinny” payment account framework aimed at fintech and crypto-focused firms and signaled a temporary pause on new Tier 3 applications for master account access. The move seeks public input on a narrower path to the Fed’s payment services while the central bank reassesses risks from novel charters and nonbank institutions.
What the Fed is proposing
The proposed “skinny” accounts would offer restricted access to certain Federal Reserve payment services under heightened safeguards. While full details are subject to public comment, the framework is designed to provide limited functionality and tighter risk controls than traditional master accounts, potentially including balance limits, narrower service menus, and enhanced oversight.
Pause on Tier 3 applications
Alongside the proposal, the Fed called for a temporary pause on processing new applications from Tier 3 institutions—entities that are not federally insured and not subject to federal prudential supervision. This category often includes fintech firms, crypto-related companies, and state-chartered institutions with novel business models.
The pause allows the central bank to evaluate how a constrained access model could mitigate risks before admitting additional Tier 3 applicants to its payment rails.
Background: the Fed’s three-tier review framework
- Tier 1: Federally insured depository institutions.
- Tier 2: Non–federally insured institutions subject to federal prudential supervision.
- Tier 3: Non–federally insured institutions not subject to federal prudential supervision.
Under guidelines introduced in 2022, the Fed applies progressively greater scrutiny to applicants further from traditional bank regulation, with Tier 3 facing the most stringent review.
Why it matters for fintech and crypto
Direct access to Federal Reserve payment services—such as wire transfers and ACH—can reduce reliance on intermediary banks, potentially lowering costs and settlement risk. A “skinny” account option could create a controlled avenue for certain fintech and crypto firms to connect to the payments system, though with tighter limits than conventional master accounts.
The temporary pause indicates the Fed is prioritizing risk management as it considers how best to accommodate new business models without compromising payment system safety and financial stability.
Next steps
The Federal Reserve is seeking public comment on the proposal. Further details, including the scope of permitted services, eligibility criteria, and supervisory expectations for “skinny” accounts, are expected to be refined based on feedback before any implementation.