The American Bankers Association (ABA) has voiced its opposition following the recent decision by the Federal Reserve Bank of Kansas (FED) to grant a limited purpose master account to Wyoming-based Kraken Financial within the FED System’s jurisdiction.
According to the ABA, the measure will allow entities associated with Bitcoin (BTC) and cryptocurrency exchange Kraken to access U.S. payment infrastructure. This represents systemic risk and a lack of procedural transparency.
In a statement, the association, which is trying to block the exchange’s expansion, criticized regulators for taking significant action. The rules of the game are still being defined.
The ABA questioned why access to payment systems was being granted before the public notice and comment process required to inform official guidance on so-called “Thin Master Accounts” had been completed (skinny master account), that is, an account with limited access.
“This decision is another example of a government agency taking significant action while the rules are still being developed, posing risks to the financial system, consumers, and the economy,” the ABA said. “This action will propel the carriage so far ahead that the horses will never be able to catch up,” he warned.
JPMorgan CEO Jamie Dimon added to criticism of the system in an interview with CNBC, stressing that access to banking privileges must come with equal responsibility.
Dimon said if a digital currency entity wants to operate like a bank, Must follow the same strict regulations as traditional institutions. This includes Federal Deposit Insurance Corporation (FDIC) insurance, anti-money laundering (AML/BSA) regulations, and capital requirements.
“There’s no way they’re going to do one thing and we’re going to do another without any regulation,” the executive said. Dimon warned that unless a level playing field is maintained through transparency and rigorous intelligence reporting, the public will ultimately pay the price.
“If they want to be a bank, that’s fine, but under banking law,” he added, stressing that current competition is “totally lopsided.”
However, special purpose depository institutions (SPDIs) such as Kraken Financial; Designed as a complete custodial bank. This negates the need for FDIC insurance and is in contrast to the fractional reserve banking practices practiced by commercial banks such as JPMorgan.
Like the ABA, the Bank Policy Institute (BPI) and the Independent Community Bankers Association (ICBA) expressed “deep concern” about the approval.
Despite the union’s rejection, the approval granted on March 4 marks a milestone for the Bitcoin (BTC) ecosystem. According to a report from CriptoNoticias, Kraken Financial has become the first digital asset bank in U.S. history to integrate directly into the FED system.