Ripple: Fed’s ‘Skinny’ Account Plan Backed

What to Know:

• Ripple’s CLO suggests a “skinny” master account could ease concerns for traditional banks.
• A “skinny” master account is a limited version of a full Federal Reserve master account, offering fewer features.
• Banks are pushing back against crypto firms obtaining master accounts due to financial stability and competition concerns.

Ripple is closely watching developments around Federal Reserve master accounts, which could significantly impact crypto firms. Ripple’s Chief Legal Officer, Stu Alderoty, has indicated that a “skinny” master account—a more limited version of the standard account—might be a palatable option for the company and could alleviate concerns among traditional banks. This development comes as the Federal Reserve studies the possibility of offering such accounts.

A Federal Reserve master account is a core tool for depository institutions, enabling them to conduct wholesale payments and settle transactions using central bank money. Fed Governor Christopher Waller’s proposal for a “skinny” account would impose limitations such as no access to emergency funds and no interest on balances. This could serve as a compromise amid growing tension between crypto firms seeking access to the traditional financial system and banks wary of increased competition and potential instability.

Ripple applied for a Fed master account earlier this year to facilitate the quick redemption of reserves backing its RLUSD stablecoin. Other crypto firms like Anchorage Digital Bank and Paxos Trust Company have also applied, facing resistance from the banking sector. Banks are concerned about the potential impact on financial stability and the loss of market share and fee income if crypto firms gain direct access to the Fed’s payment rails.

The Fed’s ongoing consideration of Waller’s “skinny” account concept suggests a willingness to explore ways to integrate crypto firms into the existing financial infrastructure while addressing the concerns of traditional banks. This could pave the way for more regulated on and off ramps between the crypto and traditional financial systems.

As the regulatory landscape for crypto continues to evolve, developments like the “skinny” master account proposal could play a crucial role in shaping the future of digital assets and their relationship with established financial institutions.

Related: XRP, Bitcoin Could React to Inflation Data

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