Kraken , a popular crypto trading firm in the U.S., announced on March 4 that the Federal Reserve Bank of Kansas City has approved the master account request of Kraken Financial.
The approval makes Kraken's Wyoming-chartered banking arm the first crypto bank in U.S. history to gain direct access to the Federal Reserve's payment infrastructure.
A master account is held at one of the twelve regional Federal Reserve banks that enables regulated depository institutions to maintain account balances at the central bank.
Through its Federal Reserve master account, Kraken Financial can connect directly to core U.S. payment rails, including Fedwire, without relying on intermediary banks, Kraken said.
Yet, Kraken Financial's master account has some limitations, similar to those in the proposed "skinny" master accounts . It means the institution would not be able to offer payment of interest on reserves held at the central bank.
Related: Fed moves closer to 'skinny' payment accounts for crypto banks
Banking groups slam Fed's approval of Kraken master account
Banking groups in the U.S. slammed the decision to grant a master account access to a crypto bank.
Independent Community Bankers of America (ICBA) president and CEO Rebeca Romero Rainey raised concern at the Federal Reserve Bank of Kansas City approving a master account for Kraken Financial.
"Granting nonbank entities and crypto institutions access to the master accounts traditionally limited to highly regulated insured depository institutions poses risks to the banking system... The Fed should continue limiting master account access to institutions that meet the financial services sector's highest standards."
Bank Policy Institute (BPI) regulatory affairs co-head Paige Pidano Paridon also expressed concern over the latest Fed approval to Kraken Financial.
"We are deeply concerned that the Federal Reserve Bank of Kansas City has approved an account request for a "limited purpose" master account—which appears to be a "skinny" account—before the Federal Reserve Board has finalized its policy framework for those accounts."
The Fed's decision ignores public comment that the central bank itself sought on this framework, Pardon said. There was no transparency regarding the approval process or the risk mitigants imposed to address the "very significant risks" related to the Bank Secrecy Act (BSA)/Anti-Money Laundering (AML) it raises, she added.
BPI is a powerful banking group that represents leading banking institutions, such as:
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JPMorgan Chase
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Bank of America
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Citigroup
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Wells Fargo
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Goldman Sachs
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Morgan Stanley
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U.S. Bancorp
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PNC Bank
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Truist Financial
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Capital One
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Charles Schwab
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Bank of New York Mellon
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State Street
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American Express
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HSBC Bank
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UBS Group
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M&T Bank
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Barclays
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Northern Trust
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Deutsche Bank
TheStreet Roundtable reached out to Kraken for a comment on the matter. We will update the story as soon as we receive a response.
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Why banks and crypto industry are feuding
Both the banking and crypto industries are involved in a feud for months now over the provision regarding stablecoin rewards in the crypto market structure bill.
The provision restricts crypto platforms from offering rewards to users holding stablecoins so that these platforms can't support what would be de facto unregulated bank deposits.
A stablecoin is a type of cryptocurrency that is backed 1:1 by "stable assets" like the U.S. dollar. Crypto exchanges offer stablecoin holders rewards on their holdings.
The banks are skeptical that the bank account holders would withdraw their deposits and convert them into stablecoins as the reward crypto exchanges offer are higher than the interest paid by banks.
JPMorgan Chase CEO Jamie Dimon recently said if a financial services company is holding customer balances and paying interests, it should be regulated like a bank.
The crypto industry thinks the banks are being anti-competitive in pursuing an anti-stablecoin reward agenda. In fact, Coinbase (Nasdaq: COIN), the largest crypto exchange in the U.S., even withdrew support from the Senate's draft bill in January.
Treasury Secretary Scott Bessent earlier criticized "recalcitrant actors" in the crypto industry for not coming to a compromise and agreed with the banks that stable deposits allow them to lend to community enterprises like agriculture, real estate, small businesses, etc. and nobody can risk deposit volatility in the banks.
But recently, President Donald Trump accused the banking industry of undermining the GENIUS Act and the crypto market structure bill. If the U.S. doesn't become a crypto leader, China and other countries will benefit, he warned.
Related: America's most shorted stock is Wall Street's Bitcoin machine
This story was originally published by TheStreet on Mar 5, 2026, where it first appeared in the MARKETS section. Add TheStreet as a Preferred Source by clicking here.
