May 20, 2026 — The Federal Reserve Board issued a formal proposal Wednesday asking for public comment on a new "payment account" structure that would allow legally eligible financial institutions — including crypto firms and non-bank fintechs — to access the Fed's clearing and settlement infrastructure without receiving a full master account.

The proposal, published at 4:00 p.m. EDT on May 20, opens a 60-day public comment period following the close of registration in the Federal Register.

What the proposal allows — and what it doesn't

The payment account is narrowly scoped. Holders would gain access to the Fed's payment services with automated controls to prevent overdrafts. That is the extent of the operating privilege.

Three things are explicitly off the table: intraday credit, discount window access, and interest on balances held at a Reserve Bank. The proposal also affirms that account holders would be expected to demonstrate controls for mitigating illicit finance risks.

The structure is deliberately limited. The Fed frames it as clearing-and-settlement infrastructure — not a banking license in another form. Institutions that receive a payment account cannot use it to access the Fed's lending facilities or earn yield on their reserves.

A revision, not a reboot

The proposal is substantially similar to a prototype the Board outlined in a request for information issued in December 2025, which itself carried a 45-day comment window. The new proposal incorporates feedback from that prior round.

The most notable change: closing balance limits will now be tied to an institution's expected payment activity, and the maximum closing balance has been increased. The December prototype applied a fixed cap; the revised structure is indexed to transaction volume, which is a more permissive standard for high-throughput firms.

The Kraken precedent and the pause

In March 2026, Kraken became the first crypto company to receive limited master account access, granted by the Federal Reserve Bank of Kansas City. That grant was made under existing Tier 3 guidelines — the category covering novel, non-federally insured institutions.

The new proposal comes with a direct consequence for that pipeline: the Board is asking Reserve Banks to temporarily pause decisions on Tier 3 access requests until the payment account rulemaking is finalized. The stated rationale is "greater clarity and consistency" — meaning the Fed wants a uniform policy vehicle before more accounts are granted under the older, less formalized framework.

The pause affects pending applicants. Kraken's existing access is not revoked; future approvals through the Tier 3 channel are effectively in a holding pattern.

The executive order backdrop

One day before the Fed's proposal, on May 19, 2026, President Trump signed an executive order directing the Federal Reserve to review how crypto firms and non-bank financial institutions access federal payment infrastructure. The sequence is notable: the Fed's press release makes no reference to the executive order, but the proximity suggests alignment between the administration's deregulatory push and the timing of the formal proposal.

Whether the EO accelerated the rulemaking or the two tracks were already converging is unclear from the public record. What is clear is that the Fed's proposal does not expand legal eligibility for account access — it creates a new account type within existing eligibility boundaries. Institutions not currently eligible cannot use the payment account as a workaround.

Why this matters structurally

Access to Federal Reserve payment rails has been a long-standing priority for crypto firms. Direct settlement at the Fed level eliminates the correspondent banking intermediary — reducing costs, reducing counterparty exposure, and enabling faster finality. For a sector that has spent years navigating the "debanking" problem, payment account access represents a structural improvement in institutional plumbing.

The cost reduction argument is real. Settlement through correspondent banks carries per-transaction fees and bilateral credit risk. Fed payment services eliminate both for clearing and settlement flows, though the restricted account structure means firms still need commercial banking relationships for everything outside the payment function.

The scope of applicants is potentially large: the Fed notes that requests for direct access "come from institutions that are not federally insured" and span "an increasingly wide range of business models." That description covers crypto exchanges, stablecoin issuers, payment processors, and other non-bank fintechs that have been lobbying for this access for years.

Next steps

Comments close 60 days after publication in the Federal Register. The Fed has not indicated a target date for finalizing the rule. Reserve Bank decisions on Tier 3 applications — the class that covers most crypto firms — are paused until the process concludes.

The payment account, if finalized in its current form, would be a narrow but real improvement in access: clearing and settlement rails without credit facilities, with automated overdraft controls, and with compliance obligations built into the account structure rather than layered on top of a conventional master account.

Primary source: Federal Reserve Board press release, May 20, 2026 — federalreserve.gov/newsevents/pressreleases/other20260520a.htm