Stablecoin Yield and 'Skinny' Fed Accounts Fuel Growing Crypto-Bank Divide
A second White House meeting seeks compromise on stablecoin yield as banks raise concerns over "skinny" master accounts
Welcome to the Monday edition of the Crypto in America newsletter!
What you’ll read: Crypto and banks are set to hash it out again over stablecoin yield, with tensions also rising around the Fed’s proposed “skinny” master accounts. Plus, what we’re watching this week.
The White House has scheduled a second meeting Tuesday afternoon with representatives from the crypto and banking industries in an effort to broker an agreement on the payment of stablecoin yield by crypto firms.
The gathering will not include company CEOs, but senior policy staff from banks and crypto firms, as well as some representatives from banking and crypto trade groups. Sources say major banks, including Bank of America, JPMorgan and Wells Fargo, have been invited, and invites may also have gone to PNC, Citi and U.S. Bank. Coinbase Chief Legal Officer Paul Grewal is also expected to attend.
Crypto In America was first to report the meeting, and you can read more about it here.
Besides arguing about stablecoin yield, banks and crypto leaders are also clashing over the Fed’s proposed “skinny” master accounts, which would give eligible fintech firms limited access to the Fed’s payment rails.
The divide was illustrated in 44 comment letters from a mix of crypto companies and groups, bank trade associations, and individuals, submitted to the central bank Friday. The response from the crypto side was largely positive, but the banks sounded overwhelmingly cautious, sometimes bordering on negative.
Stablecoin issuer Circle said the “skinny” master accounts would “increase the resiliency of the overall payment system”, while the Blockchain Payments Consortium (comprising leading blockchain infrastructure providers like Fireblocks, Polygon, Solana and TON) said they would “eliminate uncompetitive practices that undercut consumers and concentrate risk around a handful of banks.”
Not all crypto firms were satisfied, though. Anchorage Digital called the move a “positive step,” but criticized the proposal for not giving beneficiaries direct access to the Fed’s automated clearing house, the ability to maintain balances, and earn interest on reserves.
The banks, meanwhile, worry crypto’s less robust regulatory status could pose a problem. The American Bankers Association feels many of the entities that would be eligible for a payment account “lack a long-run supervisory track record, are not subject to consistent federal safety-and-soundness standards and may rely on evolving statutory or regulatory regimes.” The Colorado Bankers Association worries such accounts could “open up a window for expedited fraud.”
Fierce crypto critic and Better Markets CEO, Dennis Kelleher, submitted his own letter, calling the proposal “a reckless giveaway to the crypto industry that unnecessarily expands the Fed’s mandate without justification and undermines the Fed’s true mandate.”
The Fed said it would take the comments into consideration before starting to write rules around skinny master accounts, which Fed Governor Waller told Crypto In America he’s hoping to put out in the fourth quarter of this year.
👀 What To Watch This Week
Monday
1:30 p.m.: Fed Governor Christopher Waller discusses digital assets at the Global Interdependence Center Summit in La Jolla, California.
Tuesday
2:30 p.m.: The White House will host a meeting with crypto and banking representatives to try to reach an agreement on the payment of stablecoin yield by crypto firms.
3:00 p.m.: CNBC hosts the first Digital Finance Forum with speakers CFTC Chairman Mike Selig, Galaxy founder and CEO Mike Novogratz, MoonPay founder and CEO Ivan Soto-Wright, and others.
Wednesday
8:30 a.m.: The BLS will release its latest jobs report and the unemployment rate for January following last week’s delay due to the partial government shutdown.
10:00 a.m.: Securities and Exchange Commission Chairman Paul Atkins will testify before the House Financial Services Committee.
Consensus Hong Kong hosted by CoinDesk kicks off. The Crypto In America team will be on the ground.
Thursday
10:00 a.m.: Chair Atkins testifies before the Senate Banking Committee.
Friday
8:30 a.m.: The BLS will publish its January Consumer Price Index, a key inflation gauge.
Remember, new editions of the Crypto In America newsletter drop every Monday and Wednesday.
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When the only people who weigh on things like the Fed's skinny master account propoal are the people who are paid to carry water for specific constituencies, I just don't know what to make of anything.
Like: Did the public learn anything from these comments, really?
I wish some actual practitioners would weigh in, but all those practitioners work for companies that have comms offices who would go to the CEO and have an employee fired if he or she just gave their opinion on something based on their actual day-to-day work.
It kind of makes you wonder what even the point of comment letters are at this point. Everyone is going to say exactly what their messaging teams say they need to say.