Coinbase is aggressively lobbying the Federal Reserve to approve Fed payment accounts for non-bank firms like crypto exchanges, aiming to drag U.S. payments infrastructure into the modern era alongside Europe. The San Francisco giant submitted a detailed letter backing the Fed’s proposal for special-purpose Reserve Bank accounts, arguing they are essential for updating America’s creaky financial plumbing. Without this, crypto firms remain shackled to costly bank intermediaries, saddled with delays and risks that stifle innovation.
This push isn’t just about efficiency; it’s a calculated bid to embed crypto players directly into the dollar’s core settlement system. Coinbase’s chief policy officer Faryar Shirzad highlighted how the UK, EU, Brazil, and India already offer similar access, spurring competition and slashing settlement risks. Yet the U.S. proposal comes with strings attached that could render it useless for scaling operations, a point Coinbase hammers home with sharp criticism.
Coinbase Challenges Restrictive Fed Payment Accounts Framework
Coinbase’s letter cuts through the bureaucracy, positioning Fed payment accounts as a lifeline for fintech and crypto natives tired of begging banks for scraps. Currently, these firms route dollar settlements through intermediaries, inflating costs and introducing latency that no one in a 24/7 crypto world can afford. The proposal promises direct access to the Fed’s rails without a full banking charter, a game-changer if not neutered by red tape.
Shirzad’s team warns the current draft is hamstrung by overly cautious limits, risking a flop before launch. They’ve seen it work abroad: jurisdictions with open access have turbocharged their financial competitiveness. In the U.S., however, regulators seem stuck in a pre-digital mindset, proposing caps that ignore the operational realities of payment processing.
Broader market pressures amplify the urgency, as crypto firms seeking US bank charters face mounting hurdles amid regulatory flux.
Key Restrictions Undermining Utility
The Fed’s blueprint slaps low overnight balance limits and zero interest on end-of-day balances, which Coinbase calls out as deal-breakers for viable operations. These aren’t minor tweaks; they choke scalability for firms handling massive volumes. Payment risks here are operational headaches, not credit blowups demanding balance-sheet buffers, yet the proposal treats them as such.
Coinbase urges ditching the flawed balance-sheet metric, arguing it misaligns with the low-risk nature of payments. Imagine pooling customer funds in omnibus accounts for efficient settlement-that’s the efficiency play they’re championing. Without these fixes, Fed payment accounts become a symbolic gesture, not a structural upgrade.
This echoes ongoing stablecoin volume shifts, where U.S. firms lag due to payment frictions.
Global Benchmarks Exposing U.S. Lag
Europe and the UK lead with seamless access, fostering innovation without the intermediary drag. Brazil and India followed suit, reaping lower risks and fiercer competition. Coinbase’s analysis shows these models scale payments while keeping safety intact-no systemic meltdowns ensued.
In contrast, U.S. crypto outfits burn cash on bank partnerships, a relic in a blockchain age. Shirzad’s letter spells it out: match or get left behind. As Coinbase navigates global policy shifts, this domestic push is pivotal for competitiveness.
Operational Risks vs. Regulatory Overreach in Fed Payment Accounts
Diving deeper, Coinbase dismantles the Fed’s risk calculus for Fed payment accounts, insisting operational safeguards suffice without capital cushions tied to balance sheets. Payments aren’t lending sprees; they’re high-volume, low-margin flows demanding speed over padding. The exchange’s critique lands like a reality check for policymakers lost in traditional banking paradigms.
By easing intermediary reliance, these accounts would slash costs and boost resilience for U.S. consumers and businesses. Coinbase envisions a wave of efficient services, but only if regulators heed the call for simplification. The subtext? America’s payment system is wheezing while rivals sprint ahead.
This ties into wider crypto regulatory battles, where overreach stifles legit innovation.
Flawed Balance Sheet Logic Exposed
The proposal’s balance-sheet limits are a mismatch, per Coinbase, as payment risks skew operational-not credit, market, or liquidity. Capital requirements make sense for loans, not transaction processing. Firms would struggle to grow under such constraints, defeating the modernization goal.
Coinbase pushes for omnibus balances to streamline settlements, pooling funds efficiently. This isn’t reckless; it’s standard for scaling global payments. Regulators must adapt or watch fintech flee to friendlier shores.
Cost and Latency Savings Quantified
Intermediary banks add friction: higher fees, slower clears, and counterparty exposure. Direct Fed access flips this, mirroring Europe’s efficiency gains. Coinbase quotes their letter: reduced reliance on FDIC-insured partners enables safe scaling amid surging demand.
In a market eyeing 2026 outlooks, such upgrades are table stakes for survival.
Strategic Implications for Crypto in Core Finance
Coinbase isn’t just commenting; they’re angling to burrow into finance’s regulated heart via Fed payment accounts. This positions them as a systemic force, shedding peripheral status. Brian Armstrong’s firm eyes the trillion-dollar plumbing, where dollars flow ceaselessly.
Success here ripples: cheaper settlements supercharge stablecoins, DeFi, and remittances. Failure? Perpetuates the status quo, where crypto chafes at banks’ gates. With Europe as benchmark, the U.S. can’t afford complacency.
Positioning Coinbase as Systemic Player
From trading revenue dips to policy advocacy, Coinbase evolves into infrastructure heavyweight. Direct rails mean competing on par with banks, sans charter burdens. Their letter frames this as pro-consumer, but skeptics see power consolidation.
Yet the logic holds: intermediaries breed inefficiency. As macro risks loom, efficient payments buffer volatility.
Broader Industry Ripple Effects
Approval cascades to rivals, turbocharging U.S. crypto’s global edge. Stablecoin issuers, exchanges-all benefit from leaner ops. It counters narratives of crypto as fringe, proving blockchain’s payment prowess.
Tied to trends like RWA tokens in 2026, this bridges TradFi and crypto.
Criticisms and Potential Roadblocks Ahead
While bullish on the concept, Coinbase slams the draft’s constraints as adoption killers. No interest on balances? Capped overnights? These scream overregulation to a firm weaned on innovation. The exchange demands a commercially viable framework, or it’s dead on arrival.
Regulators counter with safety first, but Coinbase flips it: true risk lies in stagnation. As markets evolve, rigid rules ossify U.S. leadership. This clash defines the Fed payment accounts saga.
Overly Constraining Limits Detailed
Low caps ignore payment scale needs, per the letter. Interest absence deters holders, while balance logic flops for ops risks. Coinbase wants simplification for real-world use.
Examples from abroad validate: no chaos, just progress. U.S. must follow or lag.
Call for Omnibus and Simplified Rules
Omnibus accounts enable pooled efficiency, standard globally. Ditch unfit metrics for targeted ops controls. This blueprint ensures Fed payment accounts thrive amid 2026 bear calls.
What’s Next
The Fed’s response will signal if America’s payments awaken or snooze on. Coinbase’s advocacy spotlights a stark truth: U.S. infra lags, risking crypto’s edge. Success means seamless dollar access, fueling onchain growth; rejection entrenches intermediaries’ moats.
Watch for revisions addressing these gripes-positive tweaks could spark adoption waves. In a year of K-shaped markets, efficient rails level the field. Crypto’s push into core finance accelerates, but only if regulators listen.
Stakeholders from stablecoin players to DeFi protocols await cues, as this shapes 2026’s infrastructure battles.
