A ‘Skinny’ Fed Master Account Could Bring Back Narrow Banking

Fed Governor Chris Waller's proposal for a new "payments account," or "skinny master account," for nonbank payment providers is a significant challenge to the U.S. system where only banks access the Fed's balance sheet. This account would give eligible nonbanks direct access to the Federal Reserve’s payment rails for facilitating payments only, without traditional bank privileges like earning interest, daylight overdrafts, or discount-window access. This concept revives narrow banking—separating payments from credit creation—which has historically failed to gain traction in the U.S. The proposal could integrate stablecoin issuers, allowing them to back tokens with central bank money directly, offering a middle ground between private innovation and the Fed acting as the trusted settlement layer, potentially avoiding the need for a retail central bank digital currency.

(Source：CoinDesk)