The Fed is preparing to take a new step in terms of access to payment infrastructures. Under new regulations open for public comment, the Fed is considering creating a limited-use “payment account” (commonly known as a “weak principal account”) as an alternative to full-fledged “prime accounts.”
According to the Fed, this new payment account model will allow eligible financial institutions to access the Fed’s payment networks only for payment clearing and reconciliation operations. However, unlike existing primary accounts, these accounts will not pay interest, provide access to Fed loans, and be subject to balance caps. Additionally, this structure will not expand or modify existing statutory eligibility criteria for accessing Fed payment services.
The idea was first raised in October by Federal Reserve member Christopher Waller. Waller argued that rapid transformation and new business models in the payments sector have increased the need for more flexible but low-risk access mechanisms. Today’s Fed announcement indicates that such “payment accounts” could reduce risks to the payments system and allow applications to go through a faster review process.
Christopher Waller said in his remarks on the subject: “These new payment accounts will support innovation while ensuring the security of the payments system. Soliciting public comment is a critical first step for the Fed to adapt to the changing dynamics of how payments are made.”
The public consultation process officially began following the Fed’s call. Comments on the regulation will be accepted for 45 days from the date the proposal is published.
On the other hand, the cryptocurrency sector is also receptive to this proposal. Ripple argued that the idea of a limited-scope FED payment account designed for non-bank financial institutions could be an important turning point, easing concerns about financial stability and competition. Ripple’s chief legal officer, Stu Alderoty, previously said: “I think it’s a very attractive idea and one that should also give a certain degree of confidence to traditional banks. »
*This does not constitute investment advice.