Fed proposes 'skinny' master accounts

The Federal Reserve on May 20 asked for public comment on a proposal to create limited-purpose “payment accounts” for legally eligible financial institutions, reopening a debate over whether newer payment firms should get narrower access to central bank rails. The accounts would be used only for clearing and settling payments, according to the Board’s press release. They would not pay interest, would not provide access to Federal Reserve credit, and could be subject to balance caps. The proposal is the formal follow-through to a December 19, 2025 request for input on the same idea. In that earlier notice, the Fed said a payment account would be distinct from a traditional master account and tailored to firms seeking payments and settlement services rather than the full suite of Federal Reserve banking functions. ### Why are people calling these “skinny” master accounts? Governor Christopher Waller used the term “skinny” master account in an October 2025 speech describing a prototype that would provide access to Federal Reserve payment rails while limiting risks to the Fed and the broader payment system. (federalreserve.gov) Waller said such an account would not include “all the bells and whistles” of a master account or the full range of Federal Reserve financial services. (federalreserve.gov) The Fed’s formal language is “payment account,” not master account. The Board’s proposal page says the prototype would not expand legal eligibility for Fed accounts and services; it would instead create a special-purpose account for institutions that already qualify under the Federal Reserve Act. ### What would a payment account actually let a firm do? The May 20 proposal says the account would be for the “specific purpose of clearing and settling” payments. (federalreserve.gov) Coverage of the proposal said the structure could give qualifying firms direct access to Federal Reserve payment services rather than forcing them to rely entirely on correspondent banks or other intermediaries. The Fed’s December notice spelled out the main limits. (federalreserve.gov) A payment account would not pay interest, would not have access to Fed credit, and would be subject to balance caps, among other restrictions. Those features are meant to separate it from a standard master account and limit balance-sheet and liquidity effects. ### Where does the GENIUS Act fit into this? A Federal Reserve staff note published March 30 said the GENIUS Act, passed in July 2025, established the U.S. regulatory framework for payment stablecoins. (federalreserve.gov) That note said permitted reserve assets for payment stablecoins include deposits at depository institutions, short-term U.S. Treasury securities and balances in an account at a Federal Reserve Bank. (federalreserve.gov) Circle, in a public comment filed with the Fed, said a payment-account system would help carry forward Congress’s framework under the GENIUS Act by giving eligible payment institutions a controlled route to settlement balances at a Reserve Bank. That is an outside party’s view, not the Board’s formal rationale, but it shows how stablecoin issuers are linking the proposal to the law’s implementation. ### What objections did Fed officials raise? (federalreserve.gov) Governor Lisa Cook backed seeking comment on the proposal on May 20, saying it could create “a clear mechanism” for innovative business models while mitigating risks to individual Reserve Banks. Governor Michael Barr dissented from the specific package the same day. Barr said he supported the concept of a payment-account prototype in principle, but said the proposal lacked “sufficiently specific and robust safeguards” against money laundering and terrorist financing by institutions the Fed does not supervise. (federalreserve.gov) A staff memo released with the proposal also said Reserve Banks should pause decisions on Tier 3 access requests while the policy review continues. (federalreserve.gov) ### What happens next? The Federal Reserve’s proposal page lists June 9, 2026 as the deadline for public comments. The Board has also posted the proposal details and accompanying statements from Cook and Barr, which will shape the next round of debate over which firms, if any, can get limited-purpose access to Fed payment infrastructure. (federalreserve.gov 1) (federalreserve.gov 2)