Coinbase, a leading cryptocurrency exchange, has taken a significant step by formally requesting that the Federal Reserve expand access to its payment systems for crypto firms. This initiative aims to modernize the U.S. payment infrastructure and bring it in line with international standards.
In a recent letter, Coinbase expressed its support for a proposal advocating for a payments-specific account at the Federal Reserve. The exchange argues that granting direct access to these payment rails would not only improve efficiency but also lower operational costs for crypto businesses.
The core of this proposal revolves around establishing a special-purpose Reserve Bank payment account. This would empower eligible non-bank entities to directly engage in transaction clearing and settlement with the Federal Reserve, eliminating the need for a full commercial banking charter.
According to Faryar Shirzad, Coinbase”s chief policy officer, similar access models are already functioning effectively in countries such as the United Kingdom, the European Union, Brazil, and India. These frameworks have reportedly enhanced competition and mitigated settlement risks within their respective financial systems.
Concerns Over Restrictions
Coinbase”s proposal emphasizes the necessity for unrestricted access, opposing balance limits and no-interest rules that they believe would hinder large-scale payment operations. The company has cautioned that such conditions could deter eligible institutions from adopting the proposed payment account model.
In particular, Coinbase criticized the stipulation against earning interest on end-of-day balances and expressed concerns regarding the suggested overnight balance limits. The exchange contends that these restrictions could diminish the utility of the account, particularly for significant transactional activities.
Additionally, Coinbase has advocated for the ability to hold omnibus customer balances. This would allow for more streamlined settlement processes, promoting commercial viability within the crypto sector. The American Fintech Council has echoed similar sentiments, indicating that broader access could enhance competition and reduce reliance on traditional financial intermediaries.
Banking Sector”s Response and Future Outlook
Traditional banks have voiced their apprehensions regarding the potential systemic risks associated with allowing non-bank entities access to Federal Reserve payment systems. They argue that these firms may lack the supervisory history that banks possess, raising concerns about financial stability.
The debate surrounding this proposal could have significant implications for crypto-focused banks, such as Silvergate and Signature, which currently play a crucial role as intermediaries for crypto-related dollar transactions. If the proposal is approved, it may alter the competitive landscape for these institutions.
The Federal Reserve is expected to make a decision regarding this proposal by mid-2026, with the possibility of launching the payment account as early as the fourth quarter of that year. This decision will be critical in determining how crypto firms will integrate into the broader U.S. payment infrastructure.
In conjunction with the Coinbase news, the White House has arranged a meeting between senior officials and representatives from both sides to address concerns related to financial stability and innovation in the evolving crypto landscape.
