U.S. Rep. Maxine Waters (D-CA) is seeking information from the Federal Reserve Bank of Kansas City regarding its recent decision on a cryptocurrency exchange.
The company Payward Financial, doing business as Kraken Financial, is a cryptocurrency exchange licensed as a Wyoming Special Purpose Depository Institution. The Kansas City Fed approved a so-called “limited purpose account” for the company.
In a letter to Kansas City Fed president and CEO Jeff Schmid, Waters said that granting a crypto firm access to the Federal Reserve’s payment system for the first time raises policy, regulatory, and consumer protection concerns. Access to the nation’s core payments infrastructure carries significant public responsibility and should not be extended without full transparency, clear legal grounding, and confidence that risks are being managed, Waters added.
“Innovations in payments, digital assets, tokenization, and even artificial intelligence are rapidly outpacing statutory frameworks developed to mitigate risk, promote competition, and protect consumers in a traditional financial environment,” Waters wrote in the letter to Schmid. “Given this environment, much is required of those who exercise discretionary authority over safe access to, and operation of, our nation’s critical financial infrastructure.”
Waters asked Schmid to explain what this particular approval means in practice, including what Federal Reserve services Kraken may now access. She would also like to know what conditions or restrictions apply, and what prudential, anti-money laundering, and consumer protection considerations were considered.
“The Kansas City Fed’s announcement does not disclose specific information about Kraken’s access to the range of Federal Reserve financial services ‘due to the confidentiality of business information provided by applicants.’ However, the announcement raises questions about the approval because neither statute nor the Federal Reserve Board’s Account Access Guidelines refer to a ‘limited purpose account’ type,” Waters wrote.
Among other questions, Waters also asked Schmid if the approval was reviewed or discussed with the Federal Reserve Board, other Reserve Banks, or officials in the federal or state government. She wanted to know whether any outside influence or coordination played a role in the decision. She requests a written response by April 10.