Kraken Fed account faces early review push from bank lobby

For crypto firms seeking direct access to US payment rails, Kraken Financial's Fed account is no longer just a milestone. It is becoming a live test of how far the Federal Reserve is willing to go with crypto-linked applicants outside the usual bank supervision model.

The Independent Community Bankers of America asked the Federal Reserve Bank of Kansas City to review Kraken Financial's limited-purpose account before its initial one-year term ends. The group said the current conditions may not do enough to address operational, legal, reputational, and illicit-finance risks. It urged the Fed to consider tighter limits, suspension, non-renewal, or termination if needed.

Kraken Financial was approved under the Fed's Tier 3 process for a restricted account that allows Fedwire Funds access only. It does not include intraday credit, discount window credit, interest on balances, or use by the Kraken exchange or other Payward subsidiaries. That structure was presented in March as a way to improve settlement and reduce reliance on intermediary banks.

ICBA tied its request to reporting on crypto ATM operators and to the Fed's pending proposal for payment accounts for eligible but uninsured institutions. No public record shows the Kansas City Fed has started a termination process or found Kraken Financial out of compliance. For now, the dispute shifts Kraken's approval from precedent-setting win to regulatory review case.