Representative Maxine Waters, the ranking Democrat on the House Financial Services Committee, sent a letter on March 26 to Kansas City Federal Reserve Bank President Jeff Schmid demanding a detailed explanation of how and why his institution granted Kraken direct access to the Federal Reserve's payment infrastructure.
The letter targets a decision announced on March 4, when the Kansas City Fed approved a "limited purpose account" for Payward Financial, the Wyoming-chartered banking subsidiary that operates as Kraken Financial. That approval made Kraken the first crypto-native company to gain direct access to Fedwire, the system that processes over $4 trillion in daily fund transfers across the American banking system.
The Account Type That Doesn't Exist in Law
Waters' central objection is structural. The term "limited purpose account" does not appear in any federal statute or in the Federal Reserve Board's own Account Access Guidelines. The Kansas City Fed created a new category of access without a legal framework to govern it.
"Answers to these questions are critical to ensuring that the process of approving Federal Reserve Bank account access is conducted consistently with the law," Waters wrote. She added that "innovations in payments, digital assets, tokenization, and even artificial intelligence are rapidly outpacing statutory frameworks" designed to manage risk and protect consumers.
The timing makes this sharper. The Federal Reserve Board itself had opened a public comment period in December 2025 on creating a more limited "payment account" for non-traditional institutions. That comment period closed in February 2026. The Kansas City Fed approved Kraken's access before the Board completed that broader rulemaking process.
In other words, a regional Fed bank moved ahead of its own parent institution's policy development.
What Waters Wants to Know
The letter poses specific questions across four areas:
Service access. Which Federal Reserve services can Kraken use? The letter asks specifically about FedACH, Check Services, FedCash, and Fedwire Securities Services, beyond the core Fedwire Funds Service already confirmed.
Risk controls. Are there restrictions on daylight overdrafts or overnight balances? What heightened supervision or risk-management requirements were imposed?
Coordination. Did the Kansas City Fed consult with the Federal Reserve Board, other Reserve Banks, or any federal or state government officials before approving the account? Did any outside influence play a role?
Consumer protection. What anti-money laundering measures and consumer safeguards were considered during the review?
The deadline for Schmid's response is April 10. A Kansas City Fed spokesman confirmed the bank received the letter and "will review it."
Why This Matters Beyond Kraken
Kraken's master account eliminates the intermediary bank layer that every other crypto exchange in the United States still depends on. Instead of routing dollar deposits and withdrawals through a banking partner, Kraken Financial can settle directly on Fed rails. For institutional clients and professional traders, that could mean faster settlement, lower fees, and reduced counterparty risk.
But it also means a crypto firm now sits inside the same payment plumbing as JPMorgan and Bank of America, without the same regulatory regime. Kraken Financial is chartered as a Wyoming Special Purpose Depository Institution, not a traditional bank. It was classified as a Tier 3 entity under the Fed's review process, the strictest level, and the account runs on an initial one-year term. Kraken will not earn interest on reserves and cannot access the Fed's emergency lending facilities.
The precedent is what gives this weight. Custodia Bank, another Wyoming-chartered institution led by Caitlin Long, had its own master account application denied by the same Kansas City Fed in early 2023. A federal appeals court recently rejected Custodia's final challenge to that denial. Anchorage Digital Bank and Ripple's Standard Custody & Trust Company have also applied for accounts, and every applicant will now point to Kraken's approval as the benchmark.
The Political Dimension
Waters is classified by Stand With Crypto as "strongly against crypto," based on five public statements and six votes opposing crypto legislation including the Digital Asset Market Clarity Act and the GENIUS Act. But her inquiry carries institutional weight regardless of ideology. Democrats currently hold an 84% probability of winning House control in November's elections, according to prediction markets, which would return Waters to the committee chairmanship.
If she becomes chair, the Kansas City Fed's answers to this letter become the foundation for potential hearings, subpoenas, or legislative restrictions on crypto access to Fed services. The April 10 deadline lands well before any election cycle complications.
The broader question is whether Kraken's approval represents the beginning of a standardized path for crypto firms to access the Fed, or a one-off decision that regulators will try to contain. Waters' letter suggests at least one powerful legislator intends to make that distinction clear.
Overview
Maxine Waters sent a letter to the Kansas City Fed demanding answers on how Kraken became the first crypto firm with direct access to Federal Reserve payment infrastructure. Her core concern: the "limited purpose account" approved for Kraken doesn't exist as a defined category in any federal statute, and the approval came before the Fed Board finished its own rulemaking on such accounts. The April 10 response deadline gives the Kansas City Fed two weeks to explain its process, its coordination with other agencies, and the specific consumer protection measures it applied. The outcome could shape whether other crypto firms, including Anchorage, Custodia, and Ripple's custody arm, ever get the same access.
