The moment a crypto firm cracked open the Federal Reserve’s payment system, a senior lawmaker reached for her pen. U.S. Representative Maxine Waters wrote a letter on Thursday to Jeff Schmid, president of the Federal Reserve Bank of Kansas City, demanding a full explanation after the regional bank handed crypto exchange Kraken direct access to Federal Reserve payment services. This marks the first instance of any crypto firm in the country receiving such approval.
Waters, the ranking Democrat on the House Financial Services Committee, said the approval raises serious transparency and legal concerns. At the center of her objections is the type of account Kraken received: a so-called “limited purpose account” granted to Payward Financial, which operates as Kraken Financial. The arrangement gives the exchange entry to core payment systems used for high-value dollar settlements, potentially allowing faster transactions for institutional clients. However, it does not provide interest on reserves or access to the discount window.
The problem, Waters argued, is that no such account type appears anywhere in federal law or the Federal Reserve Board’s own Account Access Guidelines. “The announcement raises questions about the approval because neither statute nor the Federal Reserve Board’s Account Access Guidelines refers to a ‘limited purpose account’ type,” she wrote, calling on Schmid to clarify the legal basis and full scope of the arrangement. Waters set an April 10 deadline for a response.
What It Actually Covers
In her letter, Waters pressed for specifics: Does the account include access to FedACH, Fedwire, or cash services? Are there balance caps, overdraft limits, or enhanced supervisory requirements attached? Did the Kansas City Fed coordinate with the Federal Reserve Board or any other federal agency before granting the approval?
Your completely free resource hub designed to boost your knowledge of cryptocurrencies
The Kansas City Fed acknowledged receiving the letter and said it would review it. The exchange has not publicly responded to Waters’ specific concerns. Kraken Co-CEO Arjun Sethi had earlier said that the account is a milestone, calling it the “convergence of crypto infrastructure and sovereign financial rails.”
Banking Industry Pushes Back
Waters is not alone in her skepticism. Traditional banking groups moved quickly to criticize the decision. The Bank Policy Institute, which represents major U.S. banks, said it was “deeply concerned” that the Kansas City Fed moved ahead before the Federal Reserve finalized any policy framework governing such restricted accounts.
Paige Pidano Paridon, the group’s co-head of regulatory affairs, said the approval came “with no transparency into the process” and no clarity on how the Fed plans to manage the risks involved.
