- The Fed is testing a prototype of a lite payment account for fintech and other institutions outside of TradFi, and the crypto community is hyped over the possible involvement of Ripple or XRP in the new system.
A senior official at the US Federal Reserve stated that they are exploring a new account that would streamline institutional payments. Fed Governor Christopher Waller confirmed on Tuesday about the development of “skinny master accounts” for banks and other financial services providers.
The US central bank’s latest move is fueling speculation about the possible involvement of Ripple or the XRP Ledger (XRPL) infrastructure in the upcoming system.
How the Fed Skinny Master Account Would Work
Speaking at the Fed’s Payments Innovation Conference, Waller announced the pilot for a limited-access account that will link eligible firms directly to the Fed’s payment rails. The platform would enable participants to transfer money without relying on traditional intermediaries.
Additionally, Waller clarified that the Fed’s new payment account will not only be exclusive to banks. He said it will also be available for qualified fintech institutions and other firms. However, he explained that firms under the “skinny master accounts” wouldn’t have access to all the services of a full master account, such as the feature that allows banks to borrow from the Fed.
The Fed governor highlighted that they are doubling down on improving the payments sector, as innovation moves quickly. Hence, the central bank must do its best to keep up with the evolving financial landscape.
Ripple’s Possible Involvement
Ripple held an essential membership at the Fed’s Faster Payments Task Force (FPTF) in 2017. In fact, its former Director of Regulatory Relations, Ryan Zagone, was even a member of the group’s Steering Committee.
The FPTF, with significant contributions from Ripple, identified and evaluated various approaches for implementing more secure, accessible, and faster payment capabilities. These all culminated in a report that became the blueprint for FedNow Service.
This historical context is essential because Ripple has been positioning itself as a leading solution for the next generation of payments in the traditional finance (TradFi) sector. So far, the so-called “skinny master account” and the existing FedNow both lack a crucial component that would enable the Fed to achieve its goal of a more seamless real-time gross settlement system, which could compete or be on par with modern blockchain solutions.
Several analysts pointed out that Ripple’s On-Demand Liquidity (ODL) solution, powered by the XRPL, already solves the Fed’s predicament. The platform can scale using either Ripple USD (RLUSD) or XRP for different types of payments.
For domestic or cross-border payments denominated in US dollars or any transaction requiring its value to remain pegged to the central bank money, there’s the RLUSD. Meanwhile, XRP is a neutral asset for addressing non-prefunded settlements, particularly in cross-border settings.
For Ripple, this could be the final, crucial puzzle piece that would enable its tokenized digital dollar (RLUSD) to achieve central bank-level credibility and its bridge asset (XRP) to power the most efficient institutional cross-border settlement system. The market’s speculation is somehow warranted, given Ripple’s past involvement in the Fed’s upcoming payment infrastructure and how its solutions practically center on addressing the existing pain points of the traditional payment structure.
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