The Federal Reserve Bank of Kansas City has approved a Limited Purpose Master Account for Kraken Financial. For the first time, a digital asset firm now has direct access to the Fed's Fedwire payment system.
Kraken will be able to settle USD transactions without an intermediary bank, faster and cheaper than the previous route through correspondent banks. The application process took over five years. Kraken Financial, a Wyoming-chartered Special Purpose Depository Institution (SPDI), filed its application in October 2020. Approval finally came on March 4, 2026, with an initial term of one year. However, the Kansas City Fed is keeping the specific risk restrictions confidential, citing business confidentiality. Arjun Sethi, co-CEO of Kraken, described it as a "convergence of crypto infrastructure with sovereign financial rails."
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What a "skinny" master account means
The approved account is not a standard Fed Master Account. Instead, it is a restricted version known in the industry as a "Skinny Account." Kraken gains access to Fedwire for clearing and settlement of payments. In return, it forgoes key privileges available to regular banks. There is no interest on overnight reserves, no access to the Fed's Discount Window, and no daylight overdrafts.
A regular Fed Master Account forms the foundational infrastructure of the US banking system. Any bank that wants to settle directly with the central bank needs one. Until now, crypto firms had to rely on correspondent banks, an expensive detour with counterparty risk. Kraken's account eliminates this intermediary but restricts usage exclusively to clearing and settlement of payments.
Kraken Financial operates on a 100 percent reserve basis. Liquid assets must at all times equal or exceed total customer deposits. As an SPDI, Kraken Financial may accept deposits and custody digital assets but cannot extend loans. Wyoming created the legal framework for this back in 2019 with its SPDI legislation. Meanwhile, the Fed classifies Kraken as a Tier 3 applicant, the strictest review category. This category applies to uninsured institutions without federal supervision. As of the end of 2025, only one approval had been granted in this category, against three rejections and 20 pending cases.
Banking associations respond with sharp criticism
Three of the largest US banking associations immediately pushed back. The Bank Policy Institute (BPI) expressed "deep concern." Both the ICBA and the American Bankers Association (ABA) joined in.
"We are deeply concerned that the Federal Reserve Bank of Kansas City approved an application for a 'Limited Purpose' Master Account before the Federal Reserve Board has finalized its policy framework for such accounts." - Paige Pidano Paridon, Executive Vice President & Co-Head of Regulatory Affairs at the Bank Policy Institute
At its core, the issue is that the Kansas City Fed approved the account before the final regulatory framework for Skinny Accounts was in place. After all, the Fed had only put the "Payment Account" concept out for public consultation in late 2025. And the comment period closed in February 2026, just weeks before Kraken's approval.
Beyond the timing, the associations cite a lack of public consultation and AML and BSA risks. Todd Baker of Columbia University also criticized the confidentiality of the risk restrictions as "politically inappropriate." Still, his criticism targets the process, not the outcome.
Custodia rejection as a contrast
Kraken's approval stands in direct contrast to the experience of Custodia Bank. Both firms are Wyoming SPDIs. Both filed their applications in October 2020 with the same Kansas City Fed. Yet Custodia was rejected in early 2023, clearly part of the then-ongoing Operation Choke Point 2.0. Following this, the Federal Reserve Board ruled that a Wyoming charter does not make an SPDI a "bank" under federal law.
Three years later, the regulatory climate has fundamentally shifted. The Biden administration's restrictions in question have been removed. In December 2025, the OCC issued conditional National Trust Bank charters to Circle, Paxos, and three other nonbank financial companies. And the Trump administration publicly positioned itself as pro-crypto, warning against losing innovation to other countries. Kraken's approval thus implicitly reverses the earlier classification. Wyoming Governor Mark Gordon commented accordingly.
"This approval of a Master Account for Kraken by the Federal Reserve signals support for Wyoming's banking and digital asset laws." - Mark Gordon, Governor of Wyoming
Signal effect for the crypto industry
Kraken's approval comes at a strategic moment for the company. Goldman Sachs and Morgan Stanley are reportedly advising the exchange on a planned IPO that could take place as early as 2026. Direct Fed access significantly strengthens institutional credibility.
Anchorage Digital Bank, the only federally chartered crypto bank in the US, also has a pending Tier 3 application for a Fed Master Account. Anchorage already became the first stablecoin institution under the Genius Act and processed Tether's new US stablecoin USAT in January 2026. If the Fed approves this application as well, it would establish a broader precedent for integrating crypto firms into the payment system.
At the same time, the approved model remains deliberately limited. Kraken receives payment infrastructure, not banking privileges. No Discount Window, no interest on reserves, no overdraft facilities. In short, the Fed is signaling access without equality.
