Federal Reserve Governor Christopher Waller says the central bank plan is entering a new era and cryptocy will “no longer be on the fringes” while rolling out a new prototype to expand central bank services. “I wanted to send a message that this is a new era for the Federal Reserve in payments — the defi industry is not viewed with suspicion or scorn,” Waller said on Tuesday during the Fed’s Payments Innovation Conference.
“Rather, today, you are welcomed to the conversation on the future of payments in the United States and on our home field — something that would have been unimaginable a few years ago.” Distributed ledgers and crypto are increasingly being “woven into the fabric of the payment and financial systems,” Waller added. Waller is one of seven members of the Board of Governors at the Federal Reserve and was nominated to the position in 2020 by President Donald Trump during his first term.
His comments mark yet another sharp departure from how the Biden administration viewed crypto. Over the past year, the central bank has withdrawn guidance on crypto and stablecoin activities that previously discouraged banks from participating and also removed “reputational risk” as part of its examination program for banks, marking a win for the crypto industry against debanking.
Waller also said he asked the Fed to look into the idea of a “payment account,” which he said could be helpful for entities focused on innovations in payments. “This payment account concept would be targeted to provide basic Federal Reserve payment services to legally eligible institutions that right now conduct payment services primarily through a third-party bank that has a full-fledged master account,” Waller said on Tuesday.
Waller nicknamed the concept a “skinny master account” and would have some limitations around interest and overdraft privileges. A master account allows institutions direct access to the Fed’s payment systems and provides the most direct access to the U.S. money supply available to financial institutions. Those without master accounts are often forced to rely on partner banks with master accounts to provide services.
“The account would provide access to the Federal Reserve payment rails while controlling for various risks to the Federal Reserve and the payment system,” Waller said. “To control the size of the accounts and associated impacts on the Fed’s balance sheet, the Reserve Banks would not pay interest on balances in a payment account, and balance caps may be imposed.” The Fed is meeting for most of the day Tuesday as part of its Payments Innovation conference, which includes panels on tokenization and stablecoins.
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