The approval of Kraken’s access to the Federal Reserve’s core payments infrastructure has ignited a fierce response from the banking sector.

In a statement on Wednesday, the Independent Community Bankers of America (ICBA) and the Bank Policy Institute (BPI) strongly opposed the Fed’s decision, arguing it posed a risk to the financial system’s stability.

Banks Challenge Kraken’s Federal Approval

Hours after news surfaced that Kraken had become the first crypto company to secure a master account from the Federal Reserve, the ICBA issued a scathing statement in response.

“Granting nonbank entities and crypto institutions access to the master accounts traditionally limited to highly regulated insured depository institutions poses risks to the banking system,” said ICBA CEO Rebeca Romero, adding, “The Fed should continue limiting master account access to institutions that meet the financial services sector’s highest standards.”

On its part, the BPI expressed concern over the decision-making process. 

“This action ignores public comment that the Federal Reserve sought on this framework, and it was issued with no transparency into the process for approval or the risk mitigants that have been imposed to address the very significant risks it raises.”

The statements subtly highlighted that Kraken now has direct access to the same payment rails used by thousands of US banks and credit unions. This access allows it to settle US dollar transactions directly through the Fed, effectively bypassing intermediary banks. 

Kraken won’t receive all the benefits that traditional banks do with the Fed, such as earning interest on reserves. However, the approval represents a significant victory for the crypto industry.

This tension between banks and crypto extends beyond Kraken’s approval, highlighting ongoing concerns over crypto’s growing role in traditional finance.

The Ongoing Battle Over Stablecoin Interest

Before the passage of the GENIUS Act last July, banks lobbied heavily against the loose regulation of stablecoins. Their main argument centered on the danger that the bill could pose to traditional bank deposits. 

The concern was reasonable. Last April, a Treasury Department report estimated that stablecoins could lead to as much as $6.6 trillion in deposit outflows.

A month after the GENIUS Act passed, five banking associations —including the ICBA and BPI— sent a letter to Congress urging them to close a loophole that allows stablecoin issuers to pay interest through exchanges. 

They warned that such a gap could also lead to higher loan costs and less credit for businesses and families.

“Without an explicit prohibition applying to exchanges, which act as a distribution channel for stablecoin issuers or business affiliates, the requirements in the GENIUS Act can be easily evaded and undermined by allowing payment of interest indirectly to holders of stablecoins,” the letter read.

These tensions are now being carried over to discussions regarding the CLARITY Act. More specifically, the main concern is whether crypto exchanges can offer interest-like returns on stablecoins. 

Unfortunately for the banking sector, US President Donald Trump recently sided with the crypto industry.

Trump Slams Banks for Stalling CLARITY Act

On Tuesday night, the president accused US banks of undermining the GENIUS Act and stalling the CLARITY Act. 

“Americans should earn more money on their money. The Banks are hitting record profits, and we are not going to allow them to undermine our powerful Crypto Agenda that will end up going to China, and other Countries if we don’t get the Clarity Act taken care of,” Trump wrote on Truth Social.

The statement marked the sharpest presidential intervention yet in the legislative battle over stablecoin rewards. 

Trump, whose family has interests in numerous crypto ventures, is urging Congress to pass the market structure bill before the November midterm elections. These elections could dismantle the current Republican grip on the House and the Senate.

Trump’s social media post came hours after a POLITICO report confirmed that the president had a private meeting with Coinbase CEO Brian Armstrong in the White House. 

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