Highlighting a strategic shift towards embracing digital advancements, Federal Reserve Governor Christopher J. Waller has suggested the establishment of specialized “payment accounts.” These accounts are designed to offer fintech and cryptocurrency companies limited direct access to the Federal Reserve’s payment systems. Known as a “skinny master account,” this initiative aims to bridge the divide between traditional financial institutions and burgeoning players in the payment sector, potentially integrating cryptocurrency technologies more thoroughly into the core of the U.S. financial system.

Waller introduced this concept during his opening remarks at the Federal Reserve’s first-ever Payments Innovation Conference on October 21, 2025. The event was crafted to encourage discussion between established financial leaders and innovators in the crypto field.

He stressed that technologies like distributed ledgers and digital assets have moved beyond experimental stages and are now “increasingly intertwined with payment and financial systems.”

Waller asserted that this evolution necessitates a more inclusive model for accessing the Fed’s services, which traditionally have been accessible primarily to large institutions through full “master accounts” that offer benefits like earning interest and overdraft capabilities.

A Tailored Alternative to Full Master Accounts

The essence of Waller’s proposal lies in a simplified account type designed for entities focused on payment innovations, such as stablecoin issuers and blockchain-based payment services. Unlike standard master accounts, these “payment accounts” would include limitations to reduce risk: no interest on deposits, caps on the amount held, and exclusion from overdraft privileges or the Fed’s discount window for emergency lending.

The goal is to enable efficient transaction settlements without granting broader banking-like powers that could threaten financial stability.”I believe we can and should do more to support those actively transforming the payment system,” Waller stated, announcing that he had directed Fed staff to investigate the concept further.

He envisions these accounts as a “prototype” for collaboration, inviting input from stakeholders on potential benefits and pitfalls. For eligible institutions—those already legally qualified for Fed access—this could eliminate the need for cumbersome partnerships with big banks, reducing costs and speeding up cross-border and real-time transactions. The proposal arrives amid heightened scrutiny of crypto’s role in finance. The Fed has been piloting blockchain applications for payments, including explorations of tokenization, smart contracts, and AI integrations, as Waller noted during the conference.

This hands-on research underscores a broader “new era” in payments, where decentralized finance (DeFi) and crypto are welcomed rather than viewed with suspicion.

Implications for Crypto Firms and the Broader Market

The timing couldn’t be more poignant for the crypto industry, which has long lobbied for equitable access to Fed rails. Companies like Ripple, which applied for a master account earlier this year, stand to benefit immensely. Direct connectivity could slash reliance on intermediaries, enabling near-instant settlements and bolstering liquidity for institutional and retail users alike.

Caitlin Long, founder and CEO of Custodia Bank, expressed strong support for Federal Reserve Governor Christopher Waller’s proposal on limited “skinny” master accounts for payments-focused institutions, viewing it as a long-overdue correction to prior Fed restrictions that targeted crypto-native banks like hers.

Market reactions were swift: Bitcoin surged past $112,000 in the hours following the announcement, with analysts hailing it as a bullish validation of crypto’s legitimacy within the U.S. economy.

Stablecoin operators, in particular, could see their dollar-pegged assets function more seamlessly as extensions of the traditional system, accelerating adoption in global payments and treasury management.

Critics, however, caution that even limited access must be tightly regulated to avoid systemic vulnerabilities, echoing concerns from the 2023 collapses of crypto-friendly banks that fueled “Operation Chokepoint 2.0” allegations.

Waller acknowledged this balance, stressing that the initiative prioritizes innovation while safeguarding stability.

A Step Toward Inclusive Financial Evolution

Waller’s remarks signal a philosophical turn at the Fed: from wary oversight to proactive integration. By convening innovators and incumbents at the conference, the central bank is fostering an environment where crypto isn’t a disruptor to be contained but a partner in modernizing payments.

As the staff delves deeper into the payment account model, it could redefine eligibility under the Fed’s 2022 tiered review guidelines, potentially unlocking a wave of tokenized and AI-enhanced financial tools. For now, the proposal remains exploratory, with no firm timeline for implementation. Yet, in Waller’s words, it’s a clear acknowledgment that “the DeFi industry is not viewed with suspicion or scorn.”

If realized, this could mark a pivotal moment, pulling cryptocurrencies from the periphery into the pulsating core of U.S. finance.