A Proposed Bill Could Transform U.S. Payment Systems
A recently introduced bill, the Payments Access and Consumer Efficiency (PACE) Act, aims to broaden access to the Federal Reserve’s payment infrastructure for nonbank entities such as fintechs and crypto firms.
Currently, only traditional banks have direct access to the Fed’s clearing and settlement systems. The PACE Act seeks to change this by introducing a new category: Registered Covered Providers (RCPs), which would allow eligible nonbanks to apply for Federal Reserve accounts without needing a full bank charter, supervised by the Office of the Comptroller of the Currency.
Under the bill, RCPs could gain access to Fedwire, FedNow, and FedACH. Currently, banks often charge significant markups on these services, up to 100 times the Federal Reserve’s own per-item fees, which is seen as a barrier for nonbank providers.
New Opportunities for Fintech and Crypto Companies
The legislation could benefit fintechs, remittance platforms, and crypto intermediaries by allowing them more direct access to central bank payment systems. According to experts like Ben Danner from Javelin Strategy & Research, it would provide these companies with the tools necessary to compete more effectively against traditional banks.
Joel Hugentobler of Javelin Strategy & Research highlighted that this could significantly reduce dependence on bank intermediaries for crypto firms. This independence can lead to lower costs and faster transactions without points of failure, enhancing overall operational efficiency.
The Impact on Crypto Firms
Recent news about Kraken receiving a skinny account” with the Federal Reserve is indicative of the changes these new regulations could bring. Kraken now has direct access to U.S. dollar balances at the Fed, streamlining its operations and reducing reliance on intermediary banks.
This move addresses one of the biggest challenges crypto firms face: forced dependence on traditional banking infrastructure. While the account does not provide interest payments or access to the discount window, it significantly reduces operational costs and complexities for these companies.
Broader Implications
The PACE Act has garnered support from various industry associations, including the Financial Technology Association, Blockchain Association, and Crypto Council for Innovation. Advocates argue that this legislation could make everyday payments faster, cheaper, and more efficient for American consumers by reducing reliance on intermediary banks.
However, the bill’s sponsors caution that while it may reduce costs over time, there is no guarantee that savings will be passed directly to end users. Nevertheless, the bill includes robust consumer protection measures, ensuring full backing of customer funds and safe liquid asset reserves for recovery in case of failure.
Future Prospects
The proposed law faces a long legislative journey ahead before becoming reality. Traditional banks may resist efforts that could reduce their intermediary roles, highlighting the ongoing tension between incumbent financial institutions and emerging fintech players.
