WASHINGTON— House Financial Services Committee Ranking Member Maxine Waters (D-CA) is pressing the Federal Reserve Bank of Kansas City for more details on its decision to grant Kraken Financial access to the Fed’s payment system, demanding answers on what she called a novel “limited purpose account” that appears to fall outside existing statutory and regulatory categories.
In a March 26 letter to Kansas City Fed President Jeff Schmid, Waters said the approval raises “policy, regulatory, and consumer protection concerns” and asked the bank to explain the legal basis, approval process and restrictions attached to the account.
The scrutiny follows the Kansas City Fed’s March 4 announcement that it had approved a one-year “limited purpose account” for Wyoming-based Payward Financial, d/b/a Kraken Financial, a crypto firm chartered as a Wyoming special purpose depository institution. The reserve bank said Kraken was treated as a Tier 3 entity under the Fed’s Account Access Guidelines and that the account includes restrictions and limitations tailored to Kraken’s business model and risk profile, but it declined to publicly disclose the specific terms, citing confidential business information.
In her letter, Waters zeroed in on that lack of transparency, noting that neither the Federal Reserve Act nor the Fed’s existing Account Access Guidelines explicitly describe a “limited purpose account.” She asked whether Kraken’s approval was coordinated with the Federal Reserve Board and other reserve banks, what specific services Kraken can access—such as Fedwire or FedACH—and whether the account carries limits on overdrafts, balances or other operational features. Waters also pointed to the Fed Board’s recently closed request for comment on a proposed “Payment Account” prototype for payments-focused institutions, suggesting the Kansas City Fed may have effectively moved ahead with a version of that concept before the broader framework is finalized.
The Kraken approval has already stirred wider debate in banking and crypto circles because it marks the first time a crypto-linked firm has been granted direct access to Fed payment rails through this kind of tailored arrangement. American Banker previously reported Fed Vice Chair for Supervision Michelle Bowman described the one-year account as a “pilot” or “experiment,” while other observers warned it could become a template for future nontraditional applicants. Waters’ letter signals that, at least on Capitol Hill, the decision is unlikely to escape closer scrutiny as lawmakers weigh whether the Fed is creating a new path into the payments system before formal rules are in place.