US Lawmaker Probes Federal Reserve Approval of Kraken, Warns of Critical Risk – Featured Bitcoin News

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US Lawmaker Probes Federal Reserve Approval of Kraken, Warns of ‘Critical’ Risk – Featured Bitcoin News

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Lawmaker Presses Fed Over Account Approval

Heightened scrutiny over access to U.S. payment infrastructure is intensifying as policymakers examine integration. Congresswoman Maxine Waters (D-CA), ranking member of the House Financial Services Committee, sent a letter on March 26, to Federal Reserve Bank of Kansas City President and CEO Jeff Schmid seeking details on the approval of a limited purpose account for Kraken Financial.

Regulatory uncertainty has emerged around how this approval fits within existing Federal Reserve frameworks, particularly given the absence of a defined category for such accounts. The Kansas City Fed granted the account to Payward Financial, operating as Kraken Financial, for an initial one-year term with conditions aligned to its risk profile, though specifics remain undisclosed. Waters wrote:

“I write to request that you clarify the terms of Krakens account access approval and provide additional information regarding the process and considerations informing the approval.”

Key Risks, Safeguards, and Policy Implications Examined

Detailed questions in the letter probe both the mechanics of Krakens access and the safeguards surrounding it. Waters asks whether the account enables use of FedACH, Check Services, FedCash, or Fedwire Securities Services, and whether any of those capabilities differ from what is typically available to master account holders. She also seeks clarity on balance and constraints, including whether Kraken can incur daylight overdrafts, hold unlimited overnight balances, or earn interest on those balances.

The inquiry further examines whether the Kansas City Fed imposed additional examination standards, reporting obligations, or risk controls beyond Wyomings Special Purpose Depository Institution (SPDI) regime, and whether any such conditions were coordinated with the Federal Reserve Board or other Reserve Banks. Beyond operational terms, the letter requests disclosure of internal and external communications tied to the approval, including whether federal or state officials influenced or reviewed the decision-making process.

Accountability remains a central theme as Congress evaluates broader implications for financial stability and consumer protection amid evolving payment technologies. Waters wrote:

“Answers to these questions are critical to ensuring that the process of approving Federal Reserve Bank account access is conducted consistently with the law, with impartiality, and in a manner that continues to foster a safe and efficient payment system.”

She added, “This matter is of critical importance to the development and oversight of our financial system, so I request that you promptly respond in writing by April 10, 2026. I look forward to your reply.”