Banks raise alarm over Kraken’s historic Fed master account approval

The U.S. banking industry is pushing back against the Federal Reserve’s decision to grant crypto exchange Kraken direct access to its core payments infrastructure, warning the move could introduce new risks to the financial system.

Kraken’s Wyoming-chartered banking arm, Kraken Financial, recently secured a limited-purpose Federal Reserve “master account,” making it the first crypto-native firm to connect directly to the central bank’s payment rails.

The account allows the firm to process transactions through systems such as Fedwire without relying on intermediary banks, enabling faster fiat transfers tied to digital asset markets.

U.S. banking lobby warns of risks after Kraken gets Fed payment account

While the approval represents a milestone for the crypto industry, major banking groups have voiced strong concerns about the decision. The Independent Community Bankers of America (ICBA) said it has “deep concerns” about granting a master account to Kraken Financial, arguing that crypto-focused institutions operate under different regulatory frameworks than traditional banks.

Banking lobby groups also questioned the approval process. The Bank Policy Institute said the Kansas City Federal Reserve granted what appears to be a “limited purpose” or “skinny” master account before the Federal Reserve Board finalized the policy framework governing such access.

According to the group, the move lacked transparency and could undermine consistency across the Fed system.

Critics also point to Kraken Financial’s status as a Wyoming Special Purpose Depository Institution (SPDI), which is not federally insured like traditional banks. Banking advocates argue that allowing uninsured institutions to access the Fed’s settlement infrastructure could pose financial stability and compliance risks.

The debate highlights growing tensions between traditional financial institutions and the digital asset industry.

If upheld, Kraken’s approval could serve as a precedent for other crypto companies seeking similar integration with the U.S. banking system, potentially reshaping how digital assets interact with traditional financial infrastructure.