Washington, D.C. – Christopher Appel, Director of Banking Policy at Better Markets, issued the following statement alongside a comment letter opposing the Federal Reserve’s (Fed) proposal to provide special-purpose payment accounts to certain nonbank financial firms, including crypto firms: 

“The Fed’s proposal would open the door to tainted money entering the nation’s payment system by giving crypto firms and other nonbank companies accounts at the central bank. The Fed is providing its seal of approval to institutions that often operate outside the rules, safeguards, and oversight the agency applies to traditional banks, especially the community banks upon which Main Street relies. Worse, the proposal will make it more likely that deposits will leave the regulated banking system and flow into the crypto ecosystem. The diversion of deposits away from lending institutions will reduce credit available to households and businesses and further undermine the real economy. 

“The rapid collapse of FTX—Sam Bankman-Fried’s fraudulent crypto empire—demonstrated how quickly illicit activity, fraud, and weak governance can spread through the financial system. Under the Fed’s proposal, a firm like FTX could seek an account with the Fed and gain access to the payment system—creating unnecessary and unacceptable risks to financial stability and public confidence in America’s payments infrastructure. Incredibly, had the Fed’s proposed framework existed in 2022, FTX could have been operating on critical Fed payment services—such as Fedwire and FedNow—while carrying out one of the largest financial frauds in American history. 

“The Fed’s payment system is a public good whose credibility has been built over more than a century. The Fed was created to be a bank for banks, not a bank for crypto companies. The Fed should withdraw this proposal and return its focus to its core mission.” 

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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.