The White House has set 1 March as the deadline to resolve the dispute over stablecoin yield and reserve treatment. Even if negotiators strike a deal, it will not settle the broader fight over the ultimate destination of fiat deposits in the US.
The battleground over deposit migration is now shifting to a parallel debate introduced by the Federal Reserve.
The Fed is exploring the idea of a Reserve Bank Payment Account, essentially a prototype for a narrower form of Fed access. Unlike a traditional master account, which is generally reserved for federally insured banks, the structure would offer fintechs limited entry into the central bank's payment systems.
Eligible institutions would be able to access core settlement services. Through access to the Fedwire, fintechs and crypto firms would gain the ability to send and receive large-value payments directly over the Federal Reserve's real-time gross settlement system, the exact same rail used by legacy banks. Access to FedNow would provide instant retail payment capability.
In practical terms, this would allow qualifying firms to settle transactions in central bank money without routing payments through a sponsor bank. That possibility has triggered intense alarm among traditional financial institutions.
Banks warn of deposit drain
The American Bankers Association and the Independent Bankers Association of Texas argued in letters to the Fed in early February that even limited access could accelerate disintermediation, driving the migration of deposits away from community banks.
If customer funds increasingly sit in Fed-linked accounts tied to fintech or digital asset firms instead of local banks, those dollars cannot be recycled into small-business loans, farm credit or mortgages.
The Independent Bankers Association of Texas warned that rapid deposit migration towards payment account holders during stress could amplify flight-to-safety dynamics and intensify run risk for community banks, ultimately undermining financial stability. This mirrors concerns that have also stalled crypto market structure legislation in the US Senate.
Stablecoins already function as digital representations of dollars. If regulated issuers gain direct or quasi-direct access to Fed settlement rails, competitive pressure on traditional banks will severely intensify.
Bypassing the banks
Many digital asset companies currently rely on sponsor banks to access the Federal Reserve's payment systems. When those banking partners pull back, payment flows are heavily disrupted. The industry witnessed this firsthand after the collapse of FTX in 2022, when several crypto-focused banks wound down or sharply reduced their exposure to digital asset clients in a wave of debanking.
Crypto and fintech companies, including Stripe and Circle, have told regulators that routing payments through sponsor banks adds unnecessary cost and counterparty risk.
Circle noted in a comment letter to the Fed that the payment account would play an important first step in carrying forward the vision under the GENIUS ACT, which allows issuers to maintain money at a Federal Reserve Bank as part of a narrow pool of eligible reserve assets.
A late entry for the US
The US debate is unfolding later than in some other jurisdictions, where the traditional moat around central bank money is already being dismantled.
In the euro area, nonbank payment service providers are being granted expanded access to central bank-operated settlement systems to foster competition. Brazil has moved even faster. Its Pix system is now nearly universal, giving fintechs and nonbanks direct access to the central bank's instant payment rails.
The Bahamas and Jamaica have both launched retail central bank digital currencies that allow individuals to hold digital claims directly on the central bank, albeit within tightly controlled frameworks.
While none of these models precisely mirrors the Fed's proposal, they reflect a global trend towards rethinking who gets access to central bank money and on what terms. The Federal Reserve's ultimate decision on widening access will determine not just how payments are processed, but who controls the deposits that power the American economy.
