US Banks Criticize Kraken Fed Access Amid Crypto Debate

TLDR

• Kraken becomes first crypto firm with a Federal Reserve master accoun
• ICBA and BPI warn Fed access for crypto raises financial stability risks
• Banks renew push to block interest on stablecoins via exchanges
• Trump urges Congress to pass CLARITY Act before midterm elections

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Crypto exchange Kraken’s approval to access the Federal Reserve’s core payments system has intensified tensions between banks and crypto firms. The decision drew swift opposition from major banking groups, while President Donald Trump publicly backed the crypto sector.

The Federal Reserve granted Kraken a master account, allowing the exchange to settle US dollar payments directly. Banking associations warned that the move could weaken long-standing safeguards in the financial system.

Banking Groups Challenge Kraken’s Fed Approval

Kraken became the first crypto company to secure a Federal Reserve master account. The approval allows it to access the same payment rails used by thousands of US banks and credit unions.

The Independent Community Bankers of America and the Bank Policy Institute criticized the decision within hours. Both groups argued that master accounts should remain limited to insured depository institutions.

ICBA CEO Rebeca Romero said granting access to nonbank crypto firms poses risks to the banking system. She stated that the Federal Reserve should limit accounts to institutions meeting the highest standards.

The Bank Policy Institute questioned the transparency of the approval process. The institute, said the Fed, ignored public comment and did not disclose the safeguards imposed on Kraken.

Kraken will not receive interest on reserves, unlike traditional banks. However, the approval gives it direct settlement access without intermediary banks.

Stablecoin Interest Debate Returns to Congress

The dispute extends beyond Kraken’s approval and centers on stablecoin regulation. Banking groups previously opposed provisions in the GENIUS Act that allowed stablecoin issuers to offer interest-like returns.

A Treasury Department report in April estimated that stablecoins could trigger up to $6.6 trillion in deposit outflows. Banks warned that such outflows could raise loan costs and reduce credit availability.

After the GENIUS Act passed, five banking associations sent a letter to Congress. The groups urged lawmakers to close a loophole that allows exchanges to distribute interest indirectly to stablecoin holders.

They argued that without a clear prohibition, issuers could bypass restrictions through affiliated exchanges. The concern now shapes ongoing negotiations around the CLARITY Act.

Lawmakers continue to debate whether crypto exchanges should offer yield on dollar-pegged tokens. The issue remains central to discussions on market structure reform.

Trump Backs Crypto Agenda in Legislative Fight

Donald Trump intervened publicly in the dispute. On Truth Social, he accused banks of undermining crypto legislation.

He wrote that Americans should earn more money on their money. He added that banks are posting record profits while resisting crypto reforms.

Trump urged Congress to pass the CLARITY Act before the November midterm elections. He warned that delays could shift the crypto industry to other countries.

His statement followed reports of a private White House meeting with Brian Armstrong, chief executive of Coinbase. The meeting occurred as Senate discussions over the bill stalled.

The president’s comments marked a direct alignment with crypto firms in their dispute with banks. The debate now centers on stablecoin rewards and exchange authority.

Kraken’s Federal Reserve access has become a focal point in this broader policy conflict. Banks continue to press for tighter limits, while crypto firms seek expanded integration into the US financial system.

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