Key Points
- Maxine Waters questions Fed’s approval of Kraken’s limited purpose master account.
- Decision may reshape oversight and access rules for crypto-focused banks.
U.S. Representative Maxine Waters has asked the Federal Reserve Bank of Kansas City to justify its legal authority for granting a master account to Payward Financial, operating as Kraken Financial.
In a letter to Kansas City Fed President Jeff Schmid, she requested clarifications by April 10 regarding the statutory basis for what was described as a “limited purpose account.”
The regional bank confirmed the approval on March 4, 2026, marking the first time a crypto exchange-affiliated entity has received direct access to core Federal Reserve payment systems.
Waters stated that neither the Federal Reserve Act nor the Federal Reserve Board’s 2022 Account Access Guidelines reference a distinct “limited purpose” account category.
She also questioned whether the account includes access to Fedwire, FedACH, or cash services, and whether additional supervisory limits such as balance caps or overdraft restrictions apply.
The Kansas City Fed has cited confidentiality restrictions in declining to disclose certain account-holder details, a position Waters argued raises transparency concerns.
Kraken’s Access to Federal Reserve Infrastructure
A Federal Reserve master account enables institutions to settle payments directly through Fedwire and FedACH without relying on intermediary banks.
For a crypto-affiliated institution like Kraken Financial, this arrangement could streamline settlement and reduce reliance on traditional banking partners.
Kraken Financial operates under a Wyoming Special Purpose Depository Institution charter, follows a full-reserve model, and does not offer FDIC-insured deposits.
The Kansas City Fed categorized the approval as a restricted account that does not provide interest on reserves but permits settlement access.
Federal Reserve Vice Chair for Supervision Michelle Bowman described the arrangement as a one-year pilot program intended to evaluate entities operating between traditional banks and nonbank institutions.
Bowman indicated the initiative is structured as a supervised experiment to assess potential policy implications.
Legal and Regulatory Implications
The approval follows prior litigation involving Custodia Bank, another Wyoming SPDI, which challenged the Federal Reserve after being denied a master account.
In 2024, a federal district court ruled that the Kansas City Fed had discretion under 12 U.S.C. § 342 to deny access to state-chartered non-member banks.
That ruling, along with supervisory guidance issued in 2022, established a tiered review framework for novel banking applicants.
Some banking industry representatives have expressed concerns about transparency and the risk management standards applied in Kraken Financial’s case.
The Bank Policy Institute stated that the lack of detailed public explanation could create uncertainty around the regulatory framework for similar applicants.
Observers expect that any formal response to Waters may reference ongoing efforts by the Federal Reserve Board to define a narrower master account structure for crypto-related firms.
