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The Federal Reserve might have paved way for crypto firms to get master accounts, but the FDIC isn't having any of it. Are traditional stablecoin-issuing banks on the way?
Image source: DonkeyHotkey/FederalReserve/CC By 2.0.
On 15 August, the Federal Reserve announced it had finalised guidelines that would provide firms, including crypto banks and stablecoin issuers to access the Federal Reserve's accounts and payment services commonly known as a 'master account'.
Here's the catch: the likelihood of getting access to a 'master account' will ultimately depend on how federally insured applicants are, but crypto firms are not federally insured.
The Federal Deposit and Income Corporation (FDIC) only protects charter banks such as JP Morgan and their depositors against the loss of their deposits up to $250,000.
According to the FDIC: "FDIC insurance does not protect a non-bank’s customers against the default, insolvency, or bankruptcy of any non-bank entity, including crypto custodians, exchanges, brokers, wallet providers, or other entities that appear to mimic banks but are not, called neobanks.”
In response to the guidelines, Amanda Thompson, a spokesperson for Senator Pat Toomey (R-Pa.) said that the guidelines were "absurd" since a master account is a "public good".
This is where things get interesting.
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