The Federal Reserve Board is requesting public input on a prototype for a special purpose Federal Reserve Bank account (a “Payment Account”) that eligible institutions could use to clear and settle their own payments directly. Interestingly, the Federal Reserve Board’s Payments Account proposal is structured as a term sheet, serving as a preliminary framework. This presents a critical window for industry stakeholders to influence the proposed Payment Account’s design, operational parameters, and potential use cases.

An account with a Federal Reserve Bank allows direct access to wholesale payment systems and related Federal Reserve payment services, bypassing intermediary banks. Institutions must apply to a Federal Reserve Bank to receive account access. While applications from traditional banks have historically been approved quickly, so-called “nontraditional applicants” have faced delays and uncertainty despite being legally eligible. These types of institutions generally include banks that are not federally insured or subject to federal prudential supervision, such as state-chartered banks or trust companies. It is these institutions that the proposed Payment Account would most appeal to. Stablecoin issuers and other crypto firms, in particular, may benefit from the ability offered by a Payment Account to more autonomously manage on- and off-ramp liquidity between digital assets and U.S. dollars, as well as orchestrate stablecoin and fiat flows in real time.

For firms navigating fintech, stablecoin, or other innovative payment models, the proposal underscores a new era in the Federal Reserve’s engagement with payments innovation and offers a strategic opportunity for stakeholders to shape how new technologies intersect with core payment infrastructure. The key elements of the Federal Reserve’s term sheet are as follows:

Federal Reserve Bank Payment Account

Purpose: To provide eligible institutions with access to Federal Reserve payment services for the limited and express purpose of clearing and settling the institution’s own payment activity.

Eligibility: Any institution that currently satisfies legal eligibility criteria for Federal Reserve accounts and services under the Federal Reserve Act. No expansion of legal eligibility is proposed.

Access to Federal Reserve Payment Services:

• Access only to the Fedwire Funds Service, the National Settlement Service, the FedNow Service, and certain features of the Fedwire Securities Service
• Services not available: FedACH, Check, Currency, and certain other features of the Fedwire Securities Services

Account Restrictions:

• Limited purpose: Solely for settlement of the holder’s own payment activity. Payment Accounts may not be used to act as a correspondent bank or to settle payments for other institutions.
• Low overnight balance limit: Payment Account holder must reduce the account balance below a specified limit at the Federal Reserve Bank’s close of business. Proposed limit is the lesser of $500 million or 10 percent of the holder’s total assets.
• No interest on Payment Account balances
• No discount window access
• No intraday credit (daylight overdraft): Payments must be prefunded; transactions that would cause an overdraft will be rejected
• Federal Reserve Bank discretion to impose additional restrictions and risk controls on a Payment Account on a case-by-case basis

Review Process: Streamlined review, within 90 calendar days of receiving all documentation requested by the Federal Reserve Bank.

The Federal Reserve is inviting public comment on all aspects of the Payment Account prototype until February 6, 2026.

Wilson Sonsini Goodrich & Rosati advises fintech and tech companies on the evolving regulation of payment services and emerging technologies. For additional information, please contact Jess Cheng or any other member of Wilson Sonsini’s Payments practice.