The Federal Reserve’s (Fed) decision on Wednesday to grant its first account to a crypto-focused institution sparked a swift backlash from major banking groups, intensifying tensions between traditional finance and the digital asset sector at a critical juncture in US crypto legislation.
Opposition from US banking groups
Kraken Financial, a banking division of the Wyoming Stock Exchange, announced which secured the Federal Reserve’s main account — becoming the first digital asset bank in American history to gain direct access to the central bank’s payment infrastructure.
However, the account comes with limitations. Under the so-called “thin” framework for master accounts outlined by Federal Reserve Governor Christopher Waller, Kraken is allowed to hold reserves and make transactions with central bank money.
At the same time, it does not receive full banking authority. The company cannot make loans, access the Fed’s discount window, or operate as a traditional commercial bank. In essence, it provides access to payment systems without the broader powers granted to insured depository institutions.
Even with these limitations, the move drew strong criticism from the traditional banking industry. The backlash comes as banks are already grappling with broader crypto-related legislation.
Industrial groups insist that this providing stablecoin rewards from the GENIUS Act – legislation signed into law by President Donald Trump last year.
This controversy has contributed to delays surrounding the passage of a broader crypto market structure law called the CLARITY Act. Now, leading US banking associations are openly opposing the Federal Reserve’s approval of Kraken’s main account.
Potential risks in expanding access to crypto
According to to Eleanor Terrett of Crypto In America, banking lobbyists argue that the Kansas City Federal Reserve “violated policy” by approving Kraken’s application without going through the usual public comment process.
The Independent Bankers Association of America (ICBA) has issued strong objections, saying it is “very concerned” about giving crypto companies access to key accounts, as it views the sector as a potential risk to financial stability.
Meanwhile, the Bank Policy Institute accused the Kansas City Federal Reserve of effectively preempting the Fed’s public comment period and failing to follow due process in implementing what they described as significant changes to the U.S. payment system.
In their view, giving non-banks and crypto institutions access to key accounts historically limited to highly regulated insurance banks creates new vulnerabilities.
At the same time, President Trump entered the debate. Trump has resolved the legislative impasse surrounding the CLARITY Act, known as the Crypto Market Structure Bill. is set on Social Truth, expressing clear support for the crypto industry in its ongoing dispute with banks over stablecoin revenue regulations.
He urged Congress to move quickly on comprehensive legislation to structure the crypto market. Despite the president’s support, banking groups are still unsure.
According to a banking source who participated in the negotiations spoke to Crypto In America, concerns remain that “ambiguous legislative language” could allow crypto companies to avoid an earlier agreement not to provide interest or income on idle stablecoin balances.
“We want to continue the negotiations and what we are trying to defend is that this agreement is in principle free of balance, to make sure that there are no holes in it,” the source said, adding that the banks sent the proposed legal amendments to the White House a few days ago, but have not yet received a response.
Featured image from OpenArt, chart from TradingView.com
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