On May 8, the Kansas City Fed released supplemental information regarding its decision to grant a request for a limited purpose account to a Wyoming-chartered special purpose depository institution (SPDI) for an initial term of one year and included restrictions tailored for the institution’s business model and risk profile. As previously covered by InfoBytes, the Kansas City Fed announced in March that it had approved the account for an initial one-year term under the Fed’s Account Access Guidelines, making it the first digital asset-focused bank to obtain direct access to the Fed’s payment infrastructure. The supplemental release provides additional detail on the review process and the specific restrictions placed on the account.

According to the release, the Fed’s guidelines classify the institution as a Tier 3 entity, thereby subjecting it to the strictest level of review. The Kansas City Fed authorized access only to the Fedwire Funds Service and imposed several controls: (i) the institution may not access intraday credit or the discount window; (ii) the account is subject to a closing balance limit; and (iii) the account will not receive interest. The Kansas City Fed noted that these terms are consistent with the potential payment account terms under the Fed’s request for information on its Reserve Bank Payment Account prototype (covered by InfoBytes here), and stated that the account “could be viewed as a pilot of the payment account concept, providing the Federal Reserve with insights in a limited and risk-controlled manner.” The release notes that the banking entity is operationally distinct from the broader cryptocurrency exchange, both of which operate under the same parent, and that no other affiliates hold Fed payment system access.

Separately, the institution’s parent company announced that it has filed an application with the OCC for a national trust charter. If approved, the entity said it would provide institutional and individual customers with “fiduciary custody and other services primarily for digital assets.” The company characterized the application as complementary to its existing Wyoming SPDI charter and Fed master account, stating that a national trust company charter would establish a federally regulated custody offering overseen by the OCC and expand “access for institutional clients who require a federally regulated qualified custodian.”