Kraken Financial Wins First Federal Reserve Master Account Granted to a Crypto Firm
For years, crypto companies seeking a direct connection to the U.S. central bank’s payment system kept running into the same closed door. On Wednesday, March 4, that changed. The Federal Reserve Bank of Kansas City approved a master account for Kraken Financial, the Wyoming-chartered bank owned by the parent company of the Kraken exchange, making it the first crypto firm to receive one.
A master account is what lets a financial institution hold funds at the Federal Reserve and move money directly over Fed payment rails such as Fedwire, the system banks use to settle large dollar transfers. Without one, crypto companies have had to route dollar payments through partner banks, which adds cost and leaves them dependent on institutions that can cut ties at short notice.
What Kraken received
The account is limited. According to Cointelegraph, the Kansas City Fed said the approval runs for an initial term of one year and comes with restrictions tailored to Kraken Financial’s business model and risk profile. The Fed classified the entity, Payward Financial, as a Tier 3 institution, the category that receives the closest review under the central bank’s framework for master account requests.
The approval does not come with the full set of privileges enjoyed by traditional banks. Kraken Financial will not earn interest on reserves held at the Fed, and according to The Block, the limited structure also excludes borrowing from the Fed’s discount window, its emergency lending facility.
That design closely resembles the “skinny” master account concept Fed Governor Christopher Waller floated in October 2025. The idea is to give payment-focused firms access to settlement services without the lending and interest benefits tied to full bank status. Waller said in February that the Fed hoped to roll out the framework later this year, but the Board has not yet finalized it.
Kraken calls it a milestone
In its announcement, Payward described Kraken Financial as the first digital asset bank in U.S. history to gain direct access to the Federal Reserve’s payment infrastructure. The company said the approval followed more than five years of engagement with regulators. Kraken Financial operates as a Wyoming Special Purpose Depository Institution and, according to Payward, holds liquid assets equal to or greater than all client fiat deposits.
Arjun Sethi, co-CEO of Payward and Kraken, said the milestone “marks the convergence of crypto infrastructure and sovereign financial rails.” He added that the structure lets the company settle directly on Fedwire and reduce its reliance on correspondent banks.
Payward said it will begin with institutional client activity at Kraken and expand across its wider business over time, in coordination with regulators. The company said the access could eventually support products such as settling fiat and crypto in a single step and cash management linked to digital asset custody, though it described these as possibilities rather than firm plans.
Senator Cynthia Lummis of Wyoming, a longtime advocate for the state’s crypto bank charter, called the approval a watershed moment for digital assets, according to Cointelegraph.
Banks push back
Major banking trade groups responded within hours. The Bank Policy Institute, which represents many of the largest U.S. banks, said it was deeply concerned that the Kansas City Fed acted before the Fed Board finished its policy for limited purpose accounts, The Block reported. The group also criticized what it called a lack of transparency about the approval process and the risk controls attached to it.
The Independent Community Bankers of America raised a different concern. Its president and CEO, Rebeca Romero Rainey, said giving nonbank and crypto institutions access to accounts historically reserved for insured depository institutions creates risks for the banking system.
The objections echo a broader dispute between banks and crypto firms over access to the financial system, including recent disputes over bank charters for crypto firms and over stablecoin rules. Banks argue that firms without deposit insurance and full federal supervision should not get the same plumbing. Crypto companies counter that they have been shut out for years regardless of how they are regulated.
Why it matters for crypto
The decision is significant well beyond Kraken. For much of the industry’s history, access to dollar payment rails has been one of its weakest points. When partner banks failed or withdrew, as several did in 2023, exchanges and stablecoin issuers struggled to move customer money. A direct Fed connection removes one layer of that risk for Kraken and offers a model other firms may try to follow.
It also tests whether Wyoming’s special purpose bank charter can win acceptance at the federal level. Custodia Bank, another Wyoming-chartered crypto bank, has spent years seeking a master account and has taken the fight to court. Kraken’s approval shows that the Fed is now willing to grant at least limited access to this type of institution.
There are open questions. The account is approved for one year, and its renewal will depend on how Kraken operates under the conditions attached. The Fed has also not yet published the final framework that will govern similar requests, and bank lobbyists are likely to keep pressing their objections.
Still, a crypto company now has a direct line to the U.S. central bank, something the industry has sought for more than half a decade.