Federal Reserve enters ‘new era’ in payments, Waller welcomes cryptocurrencies to the table

Federal Reserve President Christopher Waller said the central bank is entering a “new era” in payments, one that openly embraces decentralized finance (DeFi), distributed ledgers and digital asset innovation as part of the mainstream financial system.

Speaks at Fed’s first ever meeting on Tuesday Payment Innovation Conference Waller said in Washington that the central bank intends to play an “active role” in the crypto revolution that will transform the global payments landscape.

While the conference is underway, Bitcoin prices have reacted positively after a rough night. When the conference began, the price of Bitcoin was around $108,000, but it has soared to $110,321 at the time of writing.

Waller’s sentiments are a fairly notable departure from the caution and skepticism that has long defined the attitude of U.S. regulators toward cryptocurrencies.

“The DeFi industry is not viewed with suspicion or disdain,” Waller told attendees. “Rather, today is a welcome addition to the conversation about the future of payments in the United States – our home turf.”

Distributed ledgers and crypto assets are now “embedded into the fabric of payments and financial systems,” Waller said.

He added that the Fed is studying new models for integrating emerging financial technologies with traditional banking infrastructure. This includes the possibility of prototyping a new “payment account” framework that would expand central banks’ access to innovators in the field.

“Skinny” master account

Waller described the idea as a “skinny master account” designed to give legally eligible institutions, particularly fintechs and payment companies focused on digital assets, direct, albeit limited, access to the Federal Reserve’s payments rails.

These accounts pay no interest, have balance limits and are excluded from overdraft privileges and access to discount windows, but they allow payments-focused entities to settle transactions directly with the Fed without going through partner banks.

“This payment account concept is intended to provide basic Federal Reserve payment services to legally eligible institutions that currently provide payment services primarily through third-party banks,” Waller explained. “Payments innovation is moving rapidly, and the Federal Reserve needs to keep up.”

From crypto tolerance to engagement

Waller’s tone on cryptocurrencies is a major policy shift in Washington. Over the past year, central banks have quietly withdrawn restrictive guidance on cryptocurrency and stablecoin activity that had prevented banks from participating in digital asset markets.

Considerations regarding “reputational risk” have also been removed from the supervisory program. This is a tool that many in the industry have long criticized as being used to justify the debanking of crypto companies.