By Tyler Warner
5 min read
Morning Minute is a daily newsletter written by Tyler Warner. The analysis and opinions expressed are his own and do not necessarily reflect those of Decrypt. Subscribe to the Morning Minute on Substack.
GM!
Today’s top news:
For the first time in U.S. history, a crypto-native company just got a seat at the Federal Reserve’s table.
And the banking industry is furious about it.
Yesterday, Kraken Financial received approval for a Federal Reserve master account from the Federal Reserve Bank of Kansas City.
The account grants direct access to Fedwire, the Fed’s real-time settlement network. Until now, Kraken had to route all dollar transfers through intermediary banks. That’s over.
The approval is limited, meaning Kraken won’t earn interest on reserves held at the Fed, and it can’t tap the Fed’s emergency lending facilities. It’s a so-called “skinny” master account, similar to a concept the Fed floated last year.
But the significance is clear: Kraken can now settle dollar payments itself, on the same rails used by JPMorgan, Bank of America, and every other major U.S. bank.
Traditional banking groups didn’t wait long to respond.
The Bank Policy Institute and other trade groups immediately criticized the decision, warning it could threaten U.S. financial stability.
“This milestone marks the convergence of crypto infrastructure and sovereign financial rails.” - Arjun Sethi, co-CEO of Kraken
Sen. Cynthia Lummis (R-WY) called it a “watershed moment for the digital asset industry.”
Custodia Bank fought the Fed in court for years to get this and lost.
Now Kraken has it, and that’s a pretty big signal about where the regulatory environment stands under the current administration.
Kraken’s approval is explicitly being treated as a pilot for the “skinny” master account framework.
Ripple, Circle, and Paxos already have conditional OCC charters and are laying in wait. Likely just a matter of time until those dominoes fall as well.
As for the users, they are the big winners here.
Faster, more reliable fiat deposits and withdrawals are here. No more waiting 5-7 days for funds to clear (we all know how painful that can be when markets are pumping).
And the banks? Well, they may have lost another battle with the crypto companies…
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