Ripple and Circle Finally 'Directly Connected to the Fed'... How Will the US Payment System Change?

▲ Ripple, Circle / AI-generated image

A bipartisan bill allowing major cryptocurrency companies like Ripple and Circle to access the federal payment network has been introduced in the US Congress, signaling a rapid blurring of lines between traditional finance and digital assets.

Cryptocurrency specialized media CoinGape reported on April 22 that Representatives Young Kim and Sam Liccardo jointly introduced the ‘PACE Act (Payments Access and Consumer Efficiency Act)’.

The core of the bill is to allow compliant cryptocurrency companies direct access to the US Federal Reserve (Fed)'s payment infrastructure. This would enable companies like Ripple and Circle to utilize the payment network in a similar way to traditional banks.

The lawmakers who introduced the bill pointed out that the current US payment system consists of multiple stages, leading to slow processing speeds and high costs. Thus, the plan is to grant qualified non-bank payment providers access to the federal payment network, thereby increasing transfer speeds and lowering costs.

In particular, this bill officially recognizes the concept of 'skinny master accounts' and grants final authority over the approval of such accounts to the Fed's Board of Governors.

Furthermore, regulatory standards for payment companies will be strengthened. Customer assets must be held fully collateralized and managed separately from corporate assets. Safeguards are also included to ensure that consumers have priority in recovering funds if a company goes bankrupt.

The industry believes that if this bill passes, the structure of the entire cryptocurrency payment industry, including stablecoins, is likely to fundamentally change. In fact, major organizations such as the Blockchain Association, the Digital Chamber, and the Crypto Innovation Council have also come out in support of the bill.

However, there is strong opposition from existing banking circles. Some banking groups have warned that granting cryptocurrency companies access to the Fed's payment network could increase the risk of fraud, expressing their opposition to the introduction of the system.

This bill, coupled with the US crypto market structure bill (CLARITY), discussions of which have recently been delayed, is expected to be a significant variable for the overall digital asset regulatory framework. If a path opens for cryptocurrency companies to connect directly to traditional financial infrastructure, the competitive landscape of the payment market itself is likely to be significantly shaken.

*Disclaimer: This article is for investment reference only and we are not responsible for investment losses based on it. The content should be interpreted for informational purposes only.*