Kraken’s banking arm wins Fed master account access, putting crypto on the same payment rails as U.S. banks, and deepening the CLARITY Act stakes.
Kraken has made history. The U.S.’s second-largest cryptocurrency exchange announced Wednesday that its banking arm, Kraken Financial, has been approved for a Federal Reserve master account by the Kansas City Fed. It makes Kraken the first crypto-native company ever to gain direct access to the Fed’s payments infrastructure.
The approval, first reported by the Wall Street Journal, comes five and a half years after the company filed its initial application with the Kansas City Fed in October 2020. It marks a stark change in tone from a regulatory environment that, under the prior administration, the crypto industry repeatedly described as actively hostile to digital asset firms seeking banking access.
Senator Cynthia Lummis (R-WY) explained the significance of the move on CNBC, calling it “a huge step forward.”
“It really is going to be the future,” said Lummis. “In the future, you’re going to see banks buying digital asset companies. Digital Asset companies buying banks. So if you go into a bank, they can serve you both in fiat currencies like the US dollar and digital assets like Bitcoin. It’s going to create the 21st Century financial services industry.”
After more than half a decade, @krakenfx just became the FIRST digital asset company to gain direct access to the American payment system.
We are creating the 21st century financial services industry. pic.twitter.com/CnTR7w9pMo
— Senator Cynthia Lummis (@SenLummis) March 4, 2026
What the account does and doesn’t allow
Kraken Financial operates under a Wyoming charter as a Special Purpose Depository Institution (SPDI), a structure the state created specifically to accommodate crypto-focused financial companies. With the master account, the firm can now connect directly to Fedwire, the interbank payment network that handles more than $4 trillion in average daily fund transfers, without routing through correspondent banks.
Lummis, one of the primary architects of Wyoming’s SPDI framework and a long-time advocate for Kraken’s application, explained: “The Fed finally recognized the importance of this asset embedding in the US, and can now use safety and soundness standards, apply them to digital asset financial institutions like Kraken, and have partial access to the Fed, which allows them to begin integrating the US dollar with digital assets.”
The account was approved as a “Tier 3 entity” for an initial one-year term, with services to be introduced in phases beginning with institutional client activity.
What it does not include is equally important. Kraken will not earn interest on reserves held at the Fed and will not have access to the central bank’s emergency lending facilities or discount window. The structure aligns closely with the “skinny” master account framework proposed by Fed Governor Christopher Waller in October 2025, under which payment fintechs and crypto companies could apply to use Fed payment rails without the broader privileges traditionally reserved for banks.
At the time, Waller described the concept as an option that “could be beneficial for those focused primarily on payments innovations,” tailored to firms that don’t need the full suite of Federal Reserve services. He has indicated plans to finalize the framework by year-end, and the Kraken approval is understood to serve as a pilot for that effort.
Industry reaction
Kraken co-CEO Arjun Sethi framed the milestone in sweeping terms in the company’s official announcement. “This milestone marks the convergence of crypto infrastructure and sovereign financial rails,” Sethi said. “With a Federal Reserve master account, we can operate not as a peripheral participant in the U.S. banking system, but as a directly connected financial institution.”
On the practical side, Sethi told the Wall Street Journal the approval “improves reliability and efficiency for moving fiat deposits in and out of digital-asset markets,” a meaningful operational gain for large clients and professional traders who rely on rapid, seamless dollar movement.
Kansas City Fed President Jeff Schmid acknowledged the shifting landscape in an official statement. “As we know, the payments landscape is actively evolving,” Schmid said. “Throughout this transformation, the integrity and stability of the U.S. payments system remain our priority.”
Senator Lummis called the approval a “watershed milestone in the history of digital assets,” according to the WSJ.
Eleanor Terrett, journalist for Crypto America, noted on X that the approval carries embedded regulatory significance beyond the payments access itself. “The decision impliedly recognizes that the Fed believes Kraken has sufficient anti-money laundering and sanctions compliance practices to curb illicit finance risk,” Terrett wrote, “and that Wyoming’s regulatory framework for special purpose depository institutions is in line with Federal banking standards.”
Banking industry pushback
Not everyone is celebrating. The prospect of crypto and fintech firms tapping into Fed payment rails has alarmed traditional banks, and the opposition has been organized. In February, the Bank Policy Institute, Financial Services Forum, and The Clearing House Association filed a joint comment letter warning that granting direct access to lesser-regulated institutions “could increase payment system risks and undermine financial stability.”
The groups wrote: “The United States’ payment system is based on the core principles of trust, security and resiliency. We support innovation in the payments ecosystem that consistently upholds these principles and appropriately limits systemic and operational risks.”
That resistance carries an unmistakable echo of the broader CLARITY Act fight, where traditional banks have lobbied aggressively against stablecoin yield provisions that could draw deposits away from conventional savings products. The industry is fighting a multi-front battle to keep crypto at arm’s length from regulated financial infrastructure, and losing ground on multiple fronts simultaneously.
Who’s next in line?
The Kraken approval is unlikely to be the last. Custodia Bank, another Wyoming SPDI, has been pursuing master account access since around the same time as Kraken and has been in active litigation against the Fed since 2022 following a 2023 denial. Anchorage Digital, an OCC-regulated trust bank, and Ripple’s U.S. banking partner have also filed applications and are awaiting decisions.
The Kraken pilot also arrives as crypto firms have been making inroads through other regulatory channels. In December, the OCC conditionally approved national trust bank charters for five crypto companies, including Circle and Ripple. Those charters allow firms to offer bank-like services including custody of digital assets, staking, and trade settlement, though they generally cannot accept deposits or make loans. Bank lobbying groups opposed those approvals as well.
The CLARITY Act connection
The Kraken approval lands in the middle of ongoing CLARITY Act negotiations, legislation designed to establish a comprehensive framework for crypto market structure in the United States. As DeFi Rate reported, Trump just publicly blamed traditional banks for stalling the bill over fears that stablecoin yield products could compete with their low-rate savings offerings. House Financial Services Chairman French Hill has pushed the Senate to adopt House-passed language treating stablecoins as payment instruments rather than investment products, a classification central to the yield debate.
Prediction market traders on Kalshi currently give the CLARITY Act roughly a 67% chance of passing in 2026.
The Kraken approval implicitly validates Wyoming’s SPDI model as meeting federal banking standards, the same argument underpinning the CLARITY Act’s push to formalize a legal perimeter for crypto firms operating within the U.S. financial system. If the Fed is already treating a Wyoming SPDI as a credible counterpart to traditional depository institutions, Congress has one less structural objection to address. That helps explain why traditional banks aren’t thrilled about the Kraken development, but the momentum is clearly building.
