Analysis: Kraken's Approval for Fed Master Account a Historic Milestone for the Crypto Industry, Potentially Triggering Wave of Crypto Institutional Applications

On March 4, crypto reporter Eleanor Terrett tweeted: “Kraken, the U.S.’s second-largest cryptocurrency exchange, just pulled off an industry first—securing key access to the Federal Reserve. Its banking arm, Kraken Financial, has been approved by the Federal Reserve Bank of Kansas City to open a master account with the Fed. This marks the first time a native crypto firm has gained **limited** direct access to the Fed’s payment system. The approval comes after Kraken filed its application with the Kansas City Fed back in October 2020—five and a half years ago.” The account grants Kraken direct access to the Fed’s payment system but excludes use of the central bank’s lending tools. The company can hold reserves and settle transactions in central bank money, but it cannot issue loans, access the discount window, or operate as a traditional commercial bank. Sources note Kraken’s approval is viewed as a “pilot” to test this new model. The decision carries historical weight for the crypto industry, which has long been shut out of the traditional banking system, and signals a shift in the Fed’s stance. It could spark a wave of applications from other crypto firms: Custodia Bank, Anchorage, and Ripple’s U.S. banking partners have already applied for master accounts.