Federal Reserve wrestles over payments access
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Illustration: Annelise Capossela/Axios
Washington, D.C., is locked in a battle over how to integrate crypto and fintech firms into the regulated financial system. Now the Federal Reserve is confronting a similar question: Who gets access to its payment infrastructure, and on what terms?
Why it matters: The Fed on Wednesday night said it is seeking public comment on a proposal to extend limited access to its payment rails to fintech and other non-bank firms.
- The Fed's payment system is the backbone of how money moves. Who gets access will shape competition between banks and fintechs and the future of the U.S. financial system.
- The Fed had kicked off this process late last year with a request for information.
The backdrop: President Trump signed an executive order this week directing federal financial regulators to strip away barriers blocking fintech firms from the financial system and requesting the Fed specifically to evaluate and expand access to its payment accounts.
Zoom in: The Fed's proposed payment account would be more limited than that offered to traditional banks. The entities would not have access to the discount window, for instance — nor would they be able to access intraday credit.
What to watch: In a statement, Fed governor Michael Barr dissented, warning that extending access to institutions "we do not supervise" without examination authority over their anti-money-laundering compliance leaves the financial system open to risk.
- Fed governor Lisa Cook said she supported sending the proposal out for public comment, but noted the importance of soliciting public input on the risks of granting clearing capabilities to firms outside comprehensive federal oversight.
