How are you all? Today I am sharing with you an important recent political and economic update that could bring major changes to the crypto and fintech industry in the future.
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Recently, former US President Donald Trump signed an executive order, in which he instructed the Federal Reserve and other financial regulatory agencies to reconsider the barriers to entry for crypto and fintech companies into the banking and payment systems.
The main purpose of this directive is to examine the rationale for the restrictions that have long kept crypto companies out of the main US payment rails, such as Fedwire.
The most important aspect of this policy, in my view, is that now the Federal Reserve and other agencies will have to review the existing rules within three months. Then, new steps will have to be taken accordingly within six months.
This is a very fast regulatory timeline, which is rarely seen in such a complex financial sector.
The focus of this whole discussion is the “master account.” Simply put, this account is the door through which banks and large financial institutions directly connect to the federal payment system.
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Until now, crypto and non-bank fintech companies have been excluded from this facility, often having to rely on banking partnerships at additional costs.
The new guidance says that it will also be necessary to consider whether this framework can be extended to non-bank companies.
Potential for the crypto industry
If this change is implemented, it could be a major turning point for the crypto industry. Because having direct access to the payment rail means faster transactions, lower costs, and more liquidity.
In addition, some regional Fed branches have already approved accounts for some crypto-related institutions on a limited basis, which gives an indication of the future direction of this policy.
Controversy and concern
However, the banking sector is seeing mixed reactions to this decision. Big banks feel that having different rules for similar activities could create inequities in the system. On the other hand, the fintech and crypto sectors see it as a door for innovation.
The Federal Reserve is also gradually working on a “limited master account” model, where some features will be limited but participation in the payment system will be allowed.
All in all, this executive order is not just a policy decision, but it could have a major impact on the future financial structure.
It remains to be seen how much the gap between crypto and the traditional banking system will narrow. The next few months are going to be very important for this industry.