Federal Reserve Board’s Waller asks staff to explore a streamlined “payment account” for legally eligible institutions to access Fed payment rails

The Federal Reserve Board published opening remarks by Governor Christopher J. Waller at its first Payments Innovation Conference, positioning the Fed as more open to payments innovation from decentralised finance and crypto and signalling plans to study new ways to support emerging payment models. Waller said he has asked Federal Reserve staff to explore a “payment account” concept that would provide basic Federal Reserve payment services to institutions that are legally eligible for an account but may not want or need a full master account. The proposal is aimed at payments-focused firms that currently rely on a third-party bank with a master account to access Federal Reserve payment services. Waller outlined a possible “skinny” master account prototype that would provide access to Federal Reserve payment rails while constraining risk and balance sheet impacts, including no interest on balances, possible balance caps, no daylight overdraft privileges with payments rejected if balances reach zero, no discount window borrowing, and no access to payment services where Reserve Banks cannot control daylight overdraft risk. Federal Reserve staff will examine the idea and engage stakeholders on its benefits and drawbacks, with further updates expected.