In a major policy pivot, the U.S. central bank is seeking public comment on a limited access model for non-traditional financial firms, following years of legal battles and denials.
WASHINGTON, D.C. - The Federal Reserve has initiated a potentially transformative shift in the U.S. financial landscape by formally seeking public input on a proposal for "skinny" master accounts. Announced late this week, the initiative aims to grant non-traditional financial institutions-including fintechs and digital asset firms-access to the central bank's payment rails without the full suite of services and risks associated with traditional banking charters. This move comes as regulators attempt to thread the needle between fostering financial innovation and protecting the stability of the global payments system.
The proposal, which follows a concept introduced earlier this year by Federal Reserve Governor Christopher Waller, represents a significant evolution from the tiered guidelines finalized in 2022. By offering a narrower version of access, the Fed appears to be seeking a compromise that would allow new market entrants to settle payments directly while mitigating the credit and liquidity risks that have previously led to high-profile application denials.
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According to reports from American Banker and CoinDesk on December 19, 2025, the central bank is mulling a framework where firms could access payment systems without the deeper demands typically placed on full master account holders. This "skinny" version targets entities that primarily need settlement capabilities rather than borrowing privileges or other central bank services.
Governor Waller signaled support for this approach in October 2025, suggesting it could support payments innovation while insulating the Fed's balance sheet. However, the proposal is not a free pass. Industry observers note that the Fed remains cautious about opening the floodgates.
"Today's proposal attempts to establish minimum protections for expanded Federal Reserve account access but warrants further scrutiny to ensure that credit, settlement, illicit finance and other risks would be fully mitigated." - Statement reported by American Banker
To understand the significance of this week's announcement, it is necessary to look at the contentious path that led here. For years, fintechs and crypto-native banks have sought master accounts to bypass intermediary banks and settle transactions directly. In August 2022, the Fed issued final guidelines establishing a three-tiered review framework. "Tier 3" institutions-those with novel charters and no federal deposit insurance-were subject to the strictest scrutiny.
This framework effectively acted as a blockade for many applicants. In 2024, the Federal Reserve won significant legal victories against Custodia Bank and PayServices, both of which had sued after their applications were delayed or denied. According to Mayer Brown and Davis Polk, district courts upheld the Fed's discretion to deny accounts based on risk assessments, reinforcing that master account access is a privilege, not a statutory right.
Despite these legal wins, the pressure to modernize remained. The release of a transparency database in June 2023, which disclosed institutions with access or pending requests, highlighted the disparity between traditional banks and novel entrants. The "skinny" account proposal appears to be the Fed's answer to this structural tension.
For fintechs, this proposal offers a potential lifeline. Direct access to the Fed's payment rails reduces reliance on partner banks, potentially lowering costs and increasing transaction speed. However, America's Credit Unions notes that reputational injury remains a risk for institutions if they are publicly revealed to have lost access or been denied under these new transparent regimes.
The central concern for regulators remains risk. As Ledger Insights reported during the initial guideline discussions, providing access to entities involved in digital assets raises questions about whether the Federal Reserve is positioning itself as a de facto regulator for stablecoin issuers. The "skinny" model attempts to isolate payment activities from broader banking risks, but defining those boundaries will be technically and legally complex.
The public comment period will likely draw intense feedback from both the banking lobby and the fintech sector. Traditional banks have historically argued against granting lightweight access to competitors who do not bear the same regulatory compliance costs. Meanwhile, innovation advocates will scrutinize the proposal to ensure the "skinny" accounts are functional and not merely symbolic.
Regulators indicate that the finalization of this concept will depend on the industry's ability to demonstrate that limited access does not equate to limited vigilance against illicit finance. As the lines between technology companies and financial institutions continue to blur, the Fed's decision on this matter will define the architecture of the U.S. payment system for the coming decade.
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