Coinbase, the largest US-based crypto exchange, is backing a Federal Reserve proposal to grant non-bank financial institutions access to specialized payment accounts.

The San Francisco-based exchange submitted a letter to the U.S. central bank advocating for special-purpose Reserve Bank payment accounts. It argued that these accounts are vital for modernizing the nation’s domestic financial infrastructure.

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Coinbase Challenges Fed Over ‘Restrictive’ Terms for Payment Rails

Coinbase argues the proposal would grant fintech and crypto-native firms direct access to the Federal Reserve’s payment rails.

This change would allow these entities to utilize the global economy’s core “plumbing” without the need for a full commercial banking charter.

Currently, most crypto firms must rely on intermediary banks to settle dollar transactions. This process adds cost, latency, and counterparty risk to these services.

“By reducing reliance upon FDIC-insured partner banks as intermediaries for core payment functions, the Payment Account would allow account-holding institutions to offer safe and efficient services to U.S. consumers and businesses and, at the same time, reduce costs and ensure the ability of emerging payment providers to scale with growing demand,” the exchange remarked.

Faryar Shirzad, Coinbase’s chief policy officer, also noted that similar access is already available in the United Kingdom, the European Union, Brazil, and India.

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Shirzad argued that these jurisdictions have seen accelerated competition and reduced settlement risks, helping their financial sectors remain globally competitive.

However, the crypto giant warns that the current framework risks being “dead on arrival” due to overly restrictive limits.

Coinbase argues that the Federal Reserve’s current proposal contains “unnecessarily constraining” limitations. According to the firm, these restrictions could ultimately undermine the account’s utility for large-scale operations.

“Combining all of the proposed restrictions risks unnecessarily constraining the account in a way that could limit its adoption by eligible institutions for the use intended,” the exchange stated.

Specifically, the exchange criticized the lack of interest paid on end-of-day balances and the imposition of low overnight balance limits.

Coinbase also urged regulators to reconsider the “flawed” logic regarding balance-sheet limits. It noted that risks in payment services are primarily operational rather than credit-related.

“The risks associated with payments processing are operational and not credit, market, or liquidity risks of the sort that generally require a capital cushion anchored to the size of a balance sheet. As such, a balance sheet metric is not fit for purpose,” the firm wrote.

Furthermore, the company advocated for the ability to hold “omnibus” customer balances. The Brian Armstrong-led exchange argued that such moves would enable firms to pool user funds to enable more efficient settlement.

By advocating for a “simplified framework” that ensures commercial viability, Coinbase is positioning itself as a systemic player seeking to move from the periphery of finance into its regulated core.

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