The cryptocurrency industry crossed a major infrastructure milestone today \u2013 one that further cements its place in line with traditional finance and pushes it yet another step toward mass adoption.<\/p>\n
Kraken\u2019s banking arm, Kraken Financial, has secured<\/a> access to a limited-purpose master account from the US Federal Reserve Bank of Kansas. Yes, the account does come with certain limitations, but the approval marks a significant shift in the way digital asset firms interact with the traditional financial system.<\/p>\n Be it through Operation Chokepoint (2.0) or not, crypto firms have struggled to access reliable banking services for years. With this decision, Kraken is now directly connected to the heart of the infrastructure that\u2019s designed to move US dollars.<\/p>\n A Federal Reserve master account is, in effect, the central bank account that all eligible and legitimate US-based financial institutions use. Think of it this way \u2013 every bank that participates in the US payments system holds one. It allows institutions (among other things) to:<\/p>\n Settle transactions directly through the Federal Reserve In essence, this account allows financial institutions to move money across the system securely. Until today, no crypto-associated company had direct access to these rails.<\/p>\n It might sound counterintuitive, given that crypto\u2019s big bald promise is to remove intermediaries, but most crypto businesses, including exchanges, rely on traditional banking\u00a0intermediaries\u00a0<\/em>to move fiat currency.<\/p>\n Picture the process like this:<\/p>\n User deposits dollars into a partner bank. As you can clearly see, there are quite a few friction points with the way these things work, such as counterparty risk, operational delays, sudden closures of accounts \u2013 to name a few.<\/p>\n With its newly approved account, though, Kraken Financial can now connect directly to the Fed\u2019s core payment systems and bypass those intermediaries. This gives it access to direct settlement, faster fiat movement, it lowers the counterparty risk, gives the firm stronger credibility, and a whole lot more.<\/p>\n However, there\u2019s an important caveat. The account is \u201climited-purpose,\u201d and it\u2019s not entirely equivalent to master accounts that are held by commercial banks. This means that there are still some privileges that Kraken is unable to tap, such as the ability to earn interest on reserves that are held at the Fed, as well as to access the Federal Reserve\u2019s lending facilities.<\/p>\n More importantly, the move comes right as US President Donald Trump slammed<\/a> traditional banks and financial institutions for threatening the acceptance of the Genius Act and the CLARITY Act.<\/p>\n \u201cThe Genius Act is being threatened and undermined by the Banks, and that is unacceptable \u2014 We are not going to allow it,\u201d he wrote. \u201cThe U.S. needs to get Market Structure done, ASAP. Americans should earn more money on their money.\u201d<\/p>\n Although limited to Kraken, the move is also a precedent, an infrastructure development that matters far more in the long run.<\/p>\n Direct access to the payment system of the US Federal Reserve pretty much connects the market to the same financial tools that is used by the global banking system. Whether we like it or not, Bitcoin and the industry at large have become increasingly institutionalized through the approval of various exchange-traded funds, digital asset treasury firms, and whatnot.<\/p>\n Kraken\u2019s new Fed master account may not sound like a dramatic achievement to all, but it does represent a clear signal that the big guys are looking to push crypto toward the core of the financial industry.<\/p>\n The post Kraken Just Became the First Crypto Company With a Fed Master Account \u2014 Why It Matters<\/a> appeared first on CryptoPotato<\/a>.<\/p>","protected":false},"excerpt":{"rendered":" The cryptocurrency industry crossed a major infrastructure milestone today \u2013 one that further cements its place in line with traditional finance and pushes it yet another step toward mass adoption. Kraken\u2019s banking arm, Kraken Financial, has secured access to a limited-purpose master account from the US Federal Reserve Bank of Kansas. Yes, the account does […]<\/p>\n","protected":false},"author":0,"featured_media":139677,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-139676","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-discovery"],"_links":{"self":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts\/139676"}],"collection":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=139676"}],"version-history":[{"count":0,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts\/139676\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/media\/139677"}],"wp:attachment":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=139676"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=139676"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=139676"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}What is a Fed Master Account?<\/h2>\n
\nAccess the interbank payment network called Fedwire
\nMaintain balances with the central bank that underpin settlement and payments<\/p>\nWhy Does This Matter?<\/h2>\n
\nThe bank sends these funds through the Fed\u2019s payment systems.
\nThe exchange credits the user\u2019s trading account.<\/p>\nWhat This Means for the Crypto Industry<\/h2>\n