Leading U.S. cryptocurrency exchang, Kraken has achieved a historic milestone by becoming the first cryptocurrency exchange to secure direct access to the Federal Reserve's payments system. This significant development was disclosed by American crypto reporter Eleanor Terrett on Wednesday, March 4.

Kraken's banking subsidiary, Kraken Financial, received approval for a Federal Reserve master account from the Federal Reserve Bank of Kansas City.

This approval represents the culmination of years of persistent effort, as Kraken initially submitted its application back in October 2020.

With direct access to the Fed's master account, Kraken Financial is now empowered to hold reserves and settle transactions in central bank money.

However, this access comes with specific limitations outlined in rulings signed by Federal Reserve Governor Christopher Waller.

Kraken will not be permitted to engage in lending, access the Fed's discount window, or operate as a traditional commercial bank.

This approval falls under a "skinny" master account framework, with plans for the full proposal to be finalized by the end of the year.

The approved payment system is designed to mimic payments-only accounts offered by central banks in other jurisdictions, such as the United Kingdom, the European Union, and Switzerland. This positions Kraken within a globally recognized framework for regulated digital financial institutions.

This groundbreaking approval signifies a gradual embrace of the crypto ecosystem by the Federal Reserve, increasingly seen as fostering stable banking relationships with digital asset firms.

Crucially, granting Kraken Financial a master account implies that the Fed is satisfied with the firm's anti-money laundering and sanctions compliance controls.

The precedent set by Kraken's achievement is expected to pave the way for other major crypto firms, including Ripple's U.S. banking partners andCustodia Bank.

Companies that have applied for similar approvals now have a clearer path to gaining direct access to the Fed's payment system, potentially revolutionizing how digital assets interact with traditional finance.