U.S. Federal Reserve Governor Christopher Waller kicked off the central bank’s first conference on payments innovation by pledging that the Fed would embrace innovations from the crypto sector and saying he had directed staff to explore a stripped-down version of so-called “master accounts” that give financial firms access to U.S. payments rails.
“My view from the Fed now is to embrace disruption, not to avoid it,” Waller said opening Tuesday’s event. “The Fed intends to actively participate in this revolution.”
Waller, who is one of the governors on the seven-member Fed board, is reportedly among President Donald Trump’s top potential nominees to replace Fed Chairman Jerome Powell when Powell’s term ends next year. He said he suggested Tuesday’s payments conference as a way to bring the crypto world’s new innovators into the same room as traditional payments infrastructure incumbents.
“I believe we can and must do more to support those who are actively transforming the payments system,” he said. “To that end, I have asked Federal Reserve staff to explore the idea of what I call a payments account.”
He described the idea as a “skinny” version of full-fledged master accounts, allowing new entrants into payments to avoid the need for third-party relationships with institutions that have the full accounts. He suggested that the lighter payment accounts “would provide access to Federal Reserve payment channels, while controlling various Federal Reserve and payment system risks to control account sizes and associated impacts on the Fed’s balance sheet.”
They cannot, for example, pay interest on balances, benefit from 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 gather feedback on the idea and the industry would hear “more about it shortly.”
Waller is not vice chair for supervision, so he is not in a position to immediately direct the Fed’s policy decisions. The current vice chair is Michelle Bowman, and the entire board is still led by Chairman Powell, who was appointed by Trump to the position but quickly clashed with the president during Trump’s first term. But Waller has proven himself to be a prominent crypto ally at the Fed, also having just appeared at DC Fintech Week to praise innovations in decentralized finance (DeFi).
At the same event, Ripple CEO Brad Garlinghouse blasted Wall Street bankers’ resistance to crypto companies getting Fed master accounts, for which his company is among the candidates. Such accounts allow for more seamless integration into the U.S. financial system and direct access to central bank payment systems, rather than requiring crypto-native businesses to rely on outside relationships with banks.
“I wanted to send the message that this is a new era for the Federal Reserve when it comes to payments,” Waller said Tuesday. “The DeFi industry is not viewed with suspicion or contempt.” He called the Fed’s new conference “a recognition that distributed ledgers and crypto assets are no longer on the fringes but are increasingly integrated into the fabric of the payment and financial system.”
Read more: Crypto has ‘nothing to fear,’ says Fed Governor Chris Waller
