BPInsights: March 7, 2026

Kraken Obtains Fed Master Account

Crypto firm Kraken, a Wyoming Special Purpose Depository Institution, received approval from the Federal Reserve Bank of Kansas City for a "limited purpose" master account, according to announcements on Wednesday.

• Context. Master accounts are the endgame for crypto and fintech firms seeking direct access to Fed payment rails, and the Federal Reserve's approval of Kraken's request signals a pivotal expansion of such access for novel institutions.  However, these institutions are not subject to the full range of consolidated oversight and regulatory requirements that apply to insured banks.  A master account in the hands of a more lightly regulated nonbank therefore poses risks to financial stability. BPI expressed concern in 2020 when Kraken initially obtained its Wyoming SPDI charter, and has repeatedly warned of the risks of master account access for novel firms. The Federal Reserve denied master account access to another Wyoming SPDI, Custodia, sparking a legal challenge that the firm eventually lost.
• BPI Response. BPI's Paige Pidano Paridon issued a statement in response to the approval: "We are deeply concerned that the Federal Reserve Bank of Kansas City has approved an account request for a 'limited purpose' master account-which appears to be a 'skinny' account-before the Federal Reserve Board has finalized its policy framework for those accounts. This action ignores public comment that the Federal Reserve sought on this framework, and it was issued with no transparency into the process for approval or the risk mitigants that have been imposed to address the very significant risks it raises. Uninsured depository institutions, such as SPDIs, present substantially greater risks to the payment system than insured depository institutions, because these institutions are subject to a far less rigorous regulatory and supervisory framework.

We have several concerns with this approval:

• It front-runs the Board's public comment process and violates the Board's own policy on seeking public comment when it intends to make significant changes to the payments system.
• It calls into question whether the Board can ensure that the skinny account standards are applied consistently across Reserve Banks and whether the Board is appropriately supervising the Reserve Banks for compliance with account approval standards.
• It comes with no transparency about the controls and risk mitigants that have been imposed to protect against very real risks, including BSA/AML risk."

Five Key Things

1. Revolut Seeks U.S. Banking Charter

UK fintech Revolut has applied for a national bank charter in the U.S., the latest in a wave of similar applications from crypto and fintech firms seeking access to the banking system. The application is for the "most comprehensive federal-level regulatory authorization a bank can get in the U.S.," and the firm is seeking deposit insurance, according to the Wall Street Journal. Such a charter would then allow the firm to take deposits and make loans.

2. Bessent, Bowman Signal Bank Liquidity Requirement Revamp

On Tuesday, Federal Reserve Vice Chair for Supervision Michelle Bowman and Treasury Secretary Scott Bessent (in prepared remarks) began the process of reassessing and reforming bank liquidity requirements, aiming to safeguard banking system resilience while enabling banks to make more loans to businesses and households, rather than the government.

• Practical Consequences. Vice Chair Bowman observed that liquidity requirements affect bank behavior, sometimes in unintended or counterproductive ways. "In the aggregate, the liquidity framework produces strong incentives for banks to engage in 'liquidity hoarding,' where they maintain liquid assets well in excess of what may be necessary or prudent for ongoing business operations and possible stressed outflows over a 30-day window. Maintaining liquidity resources in excessive amounts may impose unnecessary costs on the banking system and the broader U.S. economy," Bowman said. The Fed's discount window is a "critical but underutilized tool" in liquidity management, and "requires fundamental reform to fulfill its intended purpose," Bowman noted. For the discount window to function as a liquidity backstop as intended, it needs consistent rules, policies and procedures, she indicated.

• Opening the Window. The discount window also featured heavily in the Treasury speech, which was delivered by Jonathan McKernan, under secretary for domestic finance. "By driving banks to exhaust regulatory buffers before accessing the discount window, we have entrenched discount window stigma. If you only go to the window when things are really bad, then going to the window signals that things are really bad," he noted. He called for a rethink of the role of the lender of last resort in liquidity. "To that end, the liquidity coverage ratio requirements and other liquidity rules should give appropriate capped recognition of borrowing capacity associated with collateral prepositioned at the discount window. This is a targeted, sensible reform that simply recognizes that prepositioned, collateralized borrowing capacity is real, monetizable liquidity." The cap could be adjusted during times of stress, McKernan said. "Regulators could also explore a mechanism to adjust the cap during severe stress. Temporarily increasing recognition could enhance buffer useability by temporarily adjusting banks' liquidity metrics. Increasing the cap during stress also could interact with incentives for ongoing, limited use to create automatic structural stabilizers that involve the discount window early on when stress is incipient."

• BPI Response. "Proper calibration of liquidity regulations will allow banks to deploy their excess liquidity to better support economic growth rather than government growth," BPI said in a statement on Tuesday in response to the speeches.

3. House Hearing Puts Fraud in Focus

The House Financial Services Financial Institutions Subcommittee held a hearing on Thursday titled "Fighting Fraud on the Front Lines: Challenges and Opportunities for Financial Institutions." Witnesses at the hearing included Joseph Schuster of Ballard Spahr, Adam Rust of the Consumer Federation of America, Kate McKune of Park Community Credit Union (representing America's Credit Unions), Gay Dempsey of Bank of Lincoln County (representing ICBA) and Patrick McDade of EverBank (representing CBA). Here are a few highlights.

• Calls for Reform. Rep. Andy Barr (R-KY), chairman of the subcommittee, called for concrete steps that would strengthen safeguards against fraud, such as updating the legal framework for threat information sharing; giving flexibility in funds availability rules; and enhancing banks' ability to adopt AI and other innovative technology for fraud prevention. "We must also guard against proposals that could unintentionally fuel more scams - placing liability on financial institutions when a customer mistakenly authorized a payment or transfer, often referred to as scams, does not address the underlying root causes of scams, and could worsen the problem by increasing instances of first-party criminal activity," Barr said.

• Telecom, Social Media. Rep. Dan Meuser (R-PA) asked witness Patrick McDade if telecom and social media companies are investing the same level of significant resources as banks are in preventing fraud and scams. "Unfortunately, they're not … we do try to partner as well as we can with the telecoms and the social media. The reality is, since they don't bear any the liability, they don't bear the responsibility," McDade said. "The truth is, they're regulated for spam. They're not regulated for scams."

• Information Sharing. McDade recommended striking a balance between privacy and threat information sharing. There should be "a safe harbor for banks to share this essential information when banks are interacting in the fraud space, we're all on the same team, and our fraud fighters are all working together to try and stop a fraud or scam from happening," he said. "And if we're prevented due to the amalgam of privacy laws that are being promulgated the state level instead of the federal level, it really creates a difficult situation for us to be able to communicate with each other." He also recommended regulators "revise the SAR policy, so we have a fraud signal report, and this would not be something that is a lagging indicator, but as soon as we're aware a fraud happened, have a concise way to get the metadata associated with that fraud reported law enforcement." This would enable banks to spot patterns across data and warn other banks about fraud, as well as notifying social media and telecom providers.

Broad Range of Tactics. Witness Gay Dempsey, a community banker, described the gamut of fraud tactics she has witnessed, as well as recent, concerning trends: a "significant rise in check fraud," a rise in imposter scams enabled by social media and bitcoin ATMs, romance scams targeting elderly people. Dempsey noted that the SCAM Act, legislation recently introduced by Reps. Meuser and Correa, would "hold social media platforms accountable" for fraud.

Undermining Trust. "Beyond the significant dollar losses, fraud is increasingly absorbing focus and attention, stealing valuable time that we should be spending with our customers. But maybe more dangerous is the intangible impact, the erosion of consumer trust in all banks," Dempsey said. "This ironically leads consumers to seek out unregulated, non-bank alternatives that put them at even greater risk."

4. Bowman Discusses Capital, Charters, Stablecoins

Federal Reserve Vice Chair for Supervision Michelle Bowman on Thursday discussed key policy topics on her agenda at a New York Bankers Association event.

• Capital. Bowman reiterated the plan to issue a Basel proposal before the end of the month. A theme in critiques of the capital framework is that regulators were not considering the cumulative impact of several requirements, Bowman said. The forthcoming capital proposal will consider the impact of all "four pillars" of the capital framework: GSIB surcharge, stress testing, Basel and the enhanced supplementary leverage ratio.
• Charters. Bowman gave context on the Fed's recent request for information on "skinny" master accounts. "We published that RFI that allowed us to ask the public, what do you think about this? What are the important aspects of a limitation on an ability to have a master account? What should it have access to? What are the - what should be the BSA requirements? How should we think about that to ensure the safety and soundness of the banking system." On Kraken's recent approval for a limited purpose account, Bowman said "And that Kraken account is only for one year. It's a limited purpose account for a very short period of time. I consider it kind of like a pilot … to see how that functions over time. I wouldn't say that it's opening the floodgates, so it's a bit of an experiment."

• Supervision. Bowman described the Fed's effort to reform bank supervision, including publishing examination manuals and communicating clear expectations. There is a need for greater consistency across examination teams and for focus on the most important risks, she said.

• Stablecoins. Bowman explained how the Fed is implementing the GENIUS Act. "I want to make sure that banks are also able to engage in these activities from your bank, maybe separated on your balance sheet, but certainly recognizing that these are critical activities where, if your customers want them, you should be able to, one, understand and two, implement if you choose to do so. So that's how the Federal Reserve is approaching it. We embrace innovation. We want you to be able to do the things that your customers ask you to do, and the things that make you competitive, as long as it's in a safe and sound way."

5. President Nominates Warsh as Fed Chair Pick

The White House formally submitted the nomination of Kevin Warsh for the Federal Reserve chair position to the Senate this week, according to an executive branch announcement. The timing of Warsh's confirmation path is uncertain; Sen. Thom Tillis (R-NC) has said he would block the nomination's advancement through the Senate Banking Committee until the Department of Justice resolves an investigation into current Chair Jerome Powell. Warsh previously served as a Federal Reserve governor from 2006 to 2011.

In Case You Missed It

BPI Responds to Executive Order on Fraud

Yesterday, the Administration issued an Executive Order cracking down on fraud and scams. BPI issued a statement of support:

"We appreciate the Administration's focus on fraud and impersonation scams, which are a pervasive problem affecting Americans. Many of these scams reach Americans through social media, digital advertising and telecom companies. We have proposed solutions to these problems, and we look forward to working with the Administration to help protect Americans from fraud and scams." - Drew Ruben, Senior Vice President, Associate General Counsel at BPI

State Bank Regulators Decry OCC Charter Moves

A state banking regulator group slammed the OCC's recent action on trust charters, which the group characterized in a recent speech as an overly broad approach devoid of limitations. Brandon Milhorn, president and CEO of the Conference of State Bank Supervisors, also expressed concern about the OCC's proposed rule implementing the GENIUS Act. Overall, Milhorn painted a picture of opacity and overreach at the agency, especially in terms of novel charters. "You should be thinking about the implications of this power play in the context of the 18 digital asset trust bank applications that the OCC is now reviewing," he said. "When will we know what activities the OCC has authorized? Only when the OCC approves a charter? Given the opaque nature of the publicly available portion of charter applications and the vague nature of OCC approvals, maybe not even then." CSBS's concerns extended beyond trust charters, however; Milhorn also expressed opposition to the OCC's view on national bank preemption. He said: "With respect to the OCC's actions, litigation is certainly a possibility. Many stakeholders are watching to ensure that the OCC does not overstep its authority. OCC preemption decisions that ignore state consumer protection laws and fail to meet the high bar set by statute and the Supreme Court will almost certainly be challenged. States will consider administrative action and litigation if OCC charters extend beyond the boundaries of the National Bank Act."

The Crypto Ledger

Here's the latest in crypto.

• President Weighs in on Market Structure Bill. In a social media post this week, President Trump urged the banking industry to "make a good deal with the Crypto Industry" on market structure legislation. The President met with Coinbase CEO Brian Armstrong, a key player in the negotiations, shortly before that social media post, according to POLITICO.
• Yield Debate Continues. The policy debate over stablecoin yield continued this week as JPMorgan Chase CEO Jamie Dimon said in a CNBC interview that "Rewards are the same as interest. A compromise would be that you could pay rewards on transactions, not balances. If you are going to be holding balances and paying interest, that's the bank. You should be regulated [like] a bank. … If you want to be a bank, become a bank." Dimon was responding to a question about Brian Armstrong's recent characterization of the yield issue. White House crypto advisor Patrick Witt expressed disagreement with Dimon's description in a social media post.

OCC Should Rescind 'Heightened Standards' Guidelines

The OCC should rescind its "heightened standards" guidelines, which focus on process and paperwork over substance and divert bank and examiner attention away from material risks, the Bank Policy Institute and American Association of Bank Directors said in a comment letter this week. The OCC's proposal to raise the application threshold for these guidelines helpfully narrows the field of institutions subject to them, but the guidelines should be rescinded rather than revised, BPI and AABD wrote.

Background: The OCC's heightened standards guidelines prescribe a single design for a national bank's risk governance framework and prescribe how every board of directors should oversee the bank's risk. The OCC first began developing these expectations in 2010 to strengthen supervision of large banks' governance and risk management after the Global Financial Crisis, culminating in a proposal and final rule in 2014. The OCC has now proposed to revise the guidelines, raising their application threshold from $50 billion to $700 billion.

"The proper role of examination is to focus on material safety and soundness risks, not prescribe how a bank chooses to organize its functions and manage its risks. Banks have different businesses, risk profiles and cultures, and their boards and management should be able to choose how to manage them, while examination focuses on the condition of the bank. The existing guidelines have become an unproductive compliance exercise that only distracts from efficient operation and sound management. The right response to a bad rule is to end it, not apply it in fewer cases," the associations stated upon filing the letter.

To learn more, click here.

BPI Statement on 2026 National Cybersecurity Strategy

The Administration announced a National Cybersecurity Strategy yesterday outlining six core pillars to strengthen America's cyber defenses. BPI President and CEO Greg Baer responded:

"Today's announcement presents a clear pathway for keeping our nation safe from emerging threats, and banks remain committed partners in this fight. Nation-state cyber intrusions and cybercrime represent significant challenges facing our nation's critical infrastructure, with cybercrime estimated to be a $10 trillion tax on the global economy. Banks and their government partners are already advancing many of the pillars reflected in this plan, and we look forward to deepening that collaboration with the Administration, the banking agencies and the Office of the National Cyber Director to strengthen the security and resilience of the financial system."

House Financial Services Committee Advances Regulatory Tailoring, Supervision Reform Bill

The House Financial Services Committee on Wednesday advanced legislation aimed at rationalizing a number of different aspects with bank regulation and supervision, aimed at boosting economic growth and expanded access to capital. The panel approved the bill, the Main Street Capital Access Act, in a party-line vote. BPI expressed support in a letter for the legislation, which incorporates regulatory and supervisory reform provisions to update regulatory tailoring thresholds to account for economic growth; promote greater transparency and accountability in bank supervision; advance stress testing reforms by directing the Fed to make scenario design and modeling assumptions subject to notice and comment; and update bank merger review standards to ensure consistency with the requirements of the law and provide fairness and timely decisionmaking for bank merger applicants.

Joint Trades Statement on FAQs on the Capital Treatment of Tokenized Securities

Following Thursday's joint issuance by the federal bank regulatory agencies of answers to frequently asked questions to clarify the capital treatment of tokenized securities, the Bank Policy Institute, Futures Industry Association, Global Blockchain Business Council, Global Digital Finance, Global Financial Markets Association, Institute of International Finance, International Swaps and Derivatives Association, and Securities Industry and Financial Markets Association issued the following statement:

"Today's interagency FAQs are a positive first step in providing much needed clarity for banks seeking to engage in tokenized securities activities. We look forward to further action in the near-term by the U.S. banking agencies to clarify the bank capital treatment of these and other digital asset-related activities. We would note that expedited revisions of the Basel cryptoasset framework that appropriately reflect recent developments in the digital assets market are needed at the global level."

Traversing the Pond

Here's the latest in international banking policy.

• Iran, Securitization: Machado's View of Risks. In a recent interview with Reuters, ECB supervisory board member Pedro Machado expressed concerns about banks' exposure to geopolitical risk amid Middle East conflict. He also warned that European banking authorities are paying close attention to synthetic securitization deals.
• ECB Economists Suggest AI is Hiring Boon. A report by two labor economists at the ECB on Wednesday struck a surprising conclusion: businesses embracing artificial intelligence are more likely to hire new staff than those that do not. Based on a study of 5,000 eurozone firms, the economists find that companies making significant use of AI are about 4% more likely to take on additional staff.
• Basel Committee Chair Defends BCBS Role. In the wake of governance concerns from the U.S. about the Basel Committee on Banking Supervision, the panel's chair, Pablo Fernandez de Cos, defended the organization's role in setting global financial regulatory standards this week. "Financial stability is a global public good that calls for cross-border co-operation," he said, according to the Financial Times. "An open global financial system requires global prudential standards. Failure here could result in regulatory fragmentation, regulatory arbitrage and a potential 'race to the bottom' that undermines the financial sector's resilience."

What to Watch Next Week

• Vice Chair Bowman gives a speech on Basel at the Cato Institute on Thursday, March 12.
• The American Bankers Association holds its annual Washington Summit from March 9-11, featuring the FDIC's Travis Hill, Fed's Michelle Bowman and OCC's Jonathan Gould as speakers.

BPI Job Bank

• AVP, Graphic Designer

Member News

Citi Announces $60 Billion Commitment to Enhance U.S. Housing Affordability

Citi recently announced its Blueprint for Housing Opportunity initiative - a $60 billion five-year housing affordability commitment dedicated to increasing the supply of housing through the creation and preservation of at least 250,000 units across the U.S. In addition, the Citi Foundation will deploy $50 million in philanthropic grants to non-profits addressing housing challenges and supporting the financial health of residents in their communities, starting with a $1 million grant to support the Center for Affordable Housing Lending.

Upcoming Events

• 3/9/2026-3/11/2026: ABA Washington Summit
• 3/12/2026: Fed Vice Chair Bowman Speech on Basel at the Cato Institute
• 3/26/2026: HFSC Digital Assets, Financial Technology and Artificial Intelligence Subcommittee Hearing: "Innovation at the Speed of Markets: How Regulators Keep Pace with Technology"
• 3/25/2026: HFSC Hearing: Tokenization and the Future of Securities: Modernizing Our Capital Markets
• 3/18/2026: Exchequer Club Luncheon with Sen. Mike Rounds (R-SD)
• 3/18/2026: HFSC Task Force on Monetary Policy, Treasury Market Resilience and Economic Prosperity Hearing: "Revisiting the Treasury-Fed Accord" 
• 3/17/2026-3/18/2026: FOMC Meeting
• 3/17/2026: House Financial Services Committee Hearing: Updating America's Financial Privacy Framework for the 21st Century