U.S. MSB Daily News
USMSB.com – The Federal Reserve Board on Dec. 19, 2025 asked for public comment on a proposed new Reserve Bank “payment account”—a special-purpose Fed account intended only for clearing and settling the accountholder’s payments, with tighter constraints than a traditional Fed master account.
For U.S. money services businesses (MSBs), the headline is not “Fed accounts for MSBs.” The Fed is explicit that the prototype does not expand legal eligibility for Fed accounts.
But the proposal matters because it could reshape how certain “payments-focused” chartered institutions connect to Fed rails—and could indirectly affect MSB-bank partnerships, settlement models, and competitive dynamics.
What is a “payment account” (and what it is not)
Purpose-limited: A payment account would be a Reserve Bank account holding limited overnight balances solely to support clearing and settlement of the accountholder’s payment activity.
Not a master account: Unlike a master account, it would have balance caps, no interest, and no access to Fed credit (including the discount window), among other limits.
Eligibility unchanged: The prototype would be available only to entities already legally eligible under the Federal Reserve Act—it would not change who qualifies.
Key design constraints MSBs should understand
1) Overnight balance cap (with enforcement tools)
The Fed is considering an overnight balance limit set at the lesser of $500 million or 10% of total assets, with potential case-by-case adjustments.
Reserve Banks would run a compliance program to enforce the cap (e.g., counseling, penalty fees, service restrictions).
2) No interest, no discount window, no daylight overdrafts
Payment accounts would pay no interest , would have no discount window access , and would not be permitted to incur intraday credit/daylight overdrafts—payments would need to be prefunded and transactions that would overdraw the account would be rejected.
3) A narrow set of Fed services
Permitted services proposed for settlement in a payment account are:
- Fedwire Funds Service
- National Settlement Service
- FedNow Service
- Fedwire Securities Service (Free Transfers only)
Explicitly excluded: FedACH, check services, FedCash, and Fedwire Securities “Transfer Against Payment”.
4) Not a correspondent / passthrough vehicle
A payment account could not be used to settle transactions for other institutions: the holder would not be permitted to act as a correspondent bank, and the account could not be used to settle for respondent institutions.
Review process: “streamlined,” but still discretionary
The Fed staff memo and draft notice anticipate that, because of the lower-risk design, requests could get a more streamlined review than comparable master account requests.
- Reserve Banks would be expected to complete review within ~90 calendar days after receiving all requested documentation.
- The Fed notes the timeline could be extended if additional due diligence is needed.
- Approval/denial remains at the Reserve Bank’s discretion, using the Fed’s Account Access Guidelines framework.
The AML/BSA/CFT fault line: Barr dissents
Governor Michael S. Barr issued a formal dissent supporting the concept of a payment account prototype but opposing this specific RFI because it is “not sufficiently specific” on safeguards to prevent use for money laundering and terrorist financing by institutions the Fed does not supervise.
Notably, the RFI itself asks commenters how the Fed should condition access on acceptable AML/BSA/CFT programs and how to best constrain illicit-finance risks associated with payment accounts.
This sets up a likely central theme of the comment process: what “acceptable” AML controls look like when the accountholder is not supervised by the Fed, and what ongoing attestations, reporting, audit rights, or operational constraints might be required.
Why MSBs should care (even if most MSBs aren’t eligible)
Because eligibility is unchanged, most MSBs (money transmitters, currency exchangers, many crypto MSBs) won’t suddenly qualify for a Fed account.
But MSBs should watch three second-order effects:
- Competitive pressure on bank/MSB settlement models
If certain non-insured but eligible “payments innovation” charters can get payment-account access to FedNow/Fedwire (within caps and prefunding requirements), they may market faster or cheaper settlement to downstream customers—potentially competing with some bank-sponsor offerings. - Sponsor-bank leverage and service design
Payment accounts are structured to avoid correspondent-style settlement and to cap balances, which may preserve the role of sponsor banks for services outside the permitted set (e.g., ACH). - Higher bar for illicit-finance controls in “payments-only” access debates
Barr’s dissent and the RFI’s AML/BSA/CFT question signal that any eventual framework may demand stronger governance, transparency, monitoring, and auditability—standards that could spill over into partner expectations for MSBs interfacing with eligible payment-account holders.
Comment clock and docket
The proposal is published as Docket No. OP-1877, with comments due 45 days after Federal Register publication.
Stakeholders can also see the Fed’s specific question set (including the AML/BSA/CFT conditioning question).
Practical next steps for MSB compliance and policy teams
Watch for evolving “safeguards” language: Barr has indicated openness to a revised framework once safeguards are made more specific.
Map your dependency on FedNow/Fedwire access via sponsor banks today, versus any relationships with “payments-focused” chartered entities that might pursue a payment account.
Prepare a comment if you have an interest in how payment-only access should interact with AML/BSA/CFT controls, settlement caps, prefunding, and third-party risk (the Fed explicitly asks how to constrain AML/BSA/CFT risks).
U.S. MSB Daily News
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