US Federal Reserve Governor Christopher Waller kicked off the central bank’s first payments innovation conference by pledging that the Fed will embrace the crypto sector’s innovations and saying he has asked staff to explore a lighter version of the so-called “master accounts” that give financial firms access to US payment rails.
“My view from the Fed from now on is to embrace the disruption, not avoid it,” Waller said to open Tuesday’s event. “The Fed intends to be an active part of that revolution.”
Waller, who is one of the governors on the seven-member Fed board, is reportedly among President Donald Trump’s potential top candidates to replace Fed Chairman Jerome Powell when Powell’s term ends next year. He said he proposed Tuesday’s payments conference to get the new innovators of the crypto world in the same room as the traditional payment infrastructures.
“I believe we can and should do more to support those who are actively transforming the payment system,” he said. “To that end, I have asked Federal Reserve staff to explore the idea of what I call a checking account.”
He described the idea as a “skinny” version of the full master accounts, allowing new participants for payments a way to avoid the need for third-party relationships with institutions that hold the full accounts. He proposed that the lighter payment accounts “would provide access to the Federal Reserve’s payment rails while the Federal Reserve and the payment system controlled for various risks to control the size of accounts and associated impacts on the Fed’s balance sheet.”
For example, they may not pay interest on balances, come with daylight overdraft privileges or provide access to borrowing through the Fed’s so-called “discount window,” and they may come with balance caps. Waller said the Fed would be gathering input on the idea and the industry will hear “more about this soon.”
Waller is not vice chairman for supervision, so he is not in a position to immediately direct the Fed’s policy actions. The current vice chair is Michelle Bowman, and the overall board is still led by Chair Powell, who was appointed by Trump to that role but quickly clashed with the president during Trump’s first term. But Waller has proven himself a prominent crypto ally at the Fed, having also just appeared at DC Fintech Week to praise decentralized finance (DeFi) innovations.
At the same event, Ripple CEO Brad Garlinghouse lamented Wall Street bankers’ opposition to crypto firms getting Fed master accounts, for which his company is among those applying. Such accounts provide more seamless integration into the US financial system and direct access to the central bank’s payment systems, rather than forcing crypto-native companies to rely on external relationships with banks.
“I wanted to send a message that this is a new era for the Federal Reserve in payments,” Waller said Tuesday. “The DeFi industry is not viewed with suspicion or derision.” He called the new Fed conference “a recognition that distributed ledgers and crypto-assets are no longer on the fringes, but increasingly woven into the fabric of the payments and financial system.”
Read more: Crypto is ‘nothing to be afraid of’, says Fed Governor Chris Waller
