Concerns over "Bank Runs"—U.S. Banks Oppose Direct Federal Reserve Access for Crypto Companies

Should we prioritize maintaining the stability of the financial system or lowering barriers to market entry? Within this dichotomy, major U.S. banking organizations have clearly expressed their stance. They are raising serious concerns about cryptocurrency and fintech companies gaining direct access to the Federal Reserve’s payment systems. The banking industry warns that such access could lead to financial crises similar to bank runs, urging federal authorities to adopt a cautious approach.

Risks of Direct Access That Banks Are Wary Of

The debate over direct access to the Federal Reserve is not merely a regulatory issue but a matter that affects the entire structure of the financial sector. According to reports from NS3.AI, U.S. banking groups argue that allowing these emerging companies to bypass the existing banking system introduces new risks to financial markets. They are particularly concerned about rapid outflows of customer funds—potentially triggering bank runs—and the resulting destabilization of the entire financial system.

Calling for a 12-Month Cautious Observation Period

The banking groups’ proposal is clear. They request a comprehensive 12-month observation and evaluation period before approving access applications from cryptocurrency and fintech firms. During this time, they argue, the operational frameworks, risk management capabilities, and market impacts of these companies must be thoroughly examined. They emphasize that access should not be granted based on formalities alone but only once safety in actual operations has been definitively demonstrated.

Stricter Regulations on Stablecoin Issuers

Particularly concerning to banking organizations is the issue of access to regulated stablecoin issuers. They are urging the Federal Reserve to restrict access to these issuers until their operational safety has been sufficiently proven. The rapid expansion of the stablecoin market has increased opacity regarding collateral management and systemic risks, raising concerns for both regulators and the banking industry.

Diverging Views on Financial System Stability

The banking industry also strongly opposes the “simplified account” proposal. They argue that this could allow cryptocurrency and fintech companies to bypass traditional partner banks, leading to a concentration of customer funds directly in these firms. Such a shift could weaken the foundation of the traditional banking system and heighten the risk of financial crises like bank runs.

The consistent stance of banking organizations is that ensuring the stability of the financial system requires a gradual and cautious policy approach rather than rapid deregulation. Balancing the promotion of new entrants with the safety of the existing financial infrastructure will be a key challenge for future regulatory oversight.