Coinbase, the largest US-based cryptocurrency exchange, supports the Federal Reserve’s proposal to allow non-bank financial institutions access to specialized payment accounts.
The San Francisco-based exchange has submitted a letter to the U.S. central bank supporting the creation of a special purpose Reserve Bank payments account. It argued that these accounts are essential to modernizing the country’s financial infrastructure.
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Coinbase Disputes Over ‘Restrictive’ Conditions in Payment Rails
Coinbase claims the proposal would give fintech and crypto-native companies direct access to the Federal Reserve’s payment rails.
The changes will allow these companies to tap into the core “plumbing” of the global economy without requiring a full commercial banking charter.
Currently, most cryptocurrency companies must rely on intermediary banks to settle dollar transactions. This process adds cost, delay, and counterparty risk to these services.
“By reducing reliance on FDIC-insured partner banks as intermediaries for core payment functions, Payment Accounts will enable account-holding institutions to provide secure and efficient services to U.S. consumers and businesses, while reducing costs and allowing emerging payment providers to scale as demand grows,” the exchange said.
Faryar Shirzad, chief policy officer at Coinbase, said similar access is already available in the UK, European Union, Brazil and India.
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Shirzad argued that these jurisdictions are increasing competition and reducing payment risks, helping to maintain the financial sector’s global competitiveness.
However, crypto giants have warned that the current framework is too restrictive and risks being “broken on arrival”.
Coinbase claims that the Federal Reserve’s current proposal contains “unnecessarily restrictive” limits. The company says these limitations could ultimately reduce the account’s usefulness in large-scale operations.
“All of the proposed restrictions, taken together, could limit their adoption by covered institutions for their intended uses and risk unnecessarily restricting accounts,” the exchange said.
Specifically, the exchange criticized the lack of interest paid on daily ending balances and the imposition of low overnight balance limits.
Coinbase also asked regulators to reconsider its “flawed” logic regarding balance sheet limits. It pointed out that risks in payment services are primarily operational rather than credit-related.
“The risks associated with payment processing are operational risks and not the types of credit, market, or liquidity risks that generally require a capital cushion commensurate with the size of the balance sheet. As such, balance sheet metrics are not fit for purpose,” the company wrote.
In addition, the company advocated the ability to maintain “omnibus” customer balances. The exchange, led by Brian Armstrong, argued that the move would allow companies to pool users’ funds and make payments more efficient.
Coinbase positions itself as a system player aiming to move from the financial periphery to the regulated core by advocating a “simplified framework” that ensures commercial viability.
