Ripple’s Federal Reserve ‘Master Account’ Application: An Analysis of its Concept, Context, and Impact

1. Introduction and Research Purpose

Ripple, a leading American cryptocurrency firm, has recently become a hot topic by taking the unusual step of applying for a ‘Master Account’ with the Federal Reserve (the Fed). A master account is a direct account with the central bank, traditionally held only by commercial banks, which provides direct access to the Fed’s payment and settlement systems and allows for the depositing of funds.

At the same time, Ripple has also applied to the Office of the Comptroller of the Currency (OCC) for a national bank charter, signaling its intention to effectively become a bank itself. This move is part of a broader trend of cryptocurrency companies seeking to enter the institutional financial system amidst regulatory uncertainty, and Ripple’s case is expected to be a major turning point in shaping the future relationship between the crypto-asset industry and traditional finance.

This report aims to analyze the background and significance of Ripple’s master account application and to examine related systems and policy trends. First, it will outline the concept and historical context of the master account, as well as the Fed’s policy background. Next, it will explore Ripple’s business structure and recent activities (e.g., its XRP-based international payments network, the launch of its RLUSD stablecoin) and analyze the technical and business reasons why Ripple needs a master account.

Furthermore, it will draw policy implications by comparing this case with similar ones, such as that of Custodia Bank, and will comprehensively review the U.S. stablecoin market status, regulatory trends, and the changing relationship between the Fed and the crypto industry. Finally, the report will summarize the implications of the Ripple case for the industry and the regulatory system and present a future outlook and policy recommendations. This report is intended for general readers interested in cryptocurrency and digital finance; therefore, specialized terms are explained simply, and analogies and examples are used for accessibility.

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2. What is a Master Account? – Concept and Policy Background

A Master Account is, in short, a current deposit account for financial institutions held at a Federal Reserve Bank. Simply put, it can be described as a “bank’s bank account” held directly with the central bank. According to the Fed’s official definition, a master account serves as a ledger that records the financial rights and obligations between the account holder (e.g., a bank) and the Fed. Through these accounts, financial institutions deposit reserves with the Fed and finalize interbank payments (e.g., Fedwire transfers, ACH settlements) using central bank money. In terms of security and finality, settlement via a master account has the same effect as “cash” and has established itself as the core infrastructure of the U.S. financial system.

2.1 History and Function

Since the establishment of the Federal Reserve in 1913, master accounts have been a fundamental service provided to Fed member banks and other eligible financial institutions. Commercial banks deposit a portion of their customer deposits as reserves in their Fed master accounts and use these accounts to execute fund settlements with other banks. Without a master account, a bank would need to go through an intermediary bank or use a clearinghouse to send funds to another bank, but having a master account enables direct transfers through the central bank’s network, which reduces settlement times and costs. Additionally, the Fed pays interest (Interest on Excess Reserves, or IOER) on master account balances and provides emergency liquidity through the discount window when necessary, making the master account a source of useful benefits and stability for financial institutions.

2.2 Legal Structure and Access Requirements

Legally, the Federal Reserve Act defines which institutions are eligible to hold a master account. According to Fed guidelines, only member banks or ‘depository institutions’ as defined in Section 19(b) of the Act are eligible to open a master account. This primarily includes traditional depository institutions such as FDIC-insured banks, savings banks, and federal credit unions. Even if these requirements are met, approval is not automatic; it is subject to an individual review by the Fed of the institution’s business model and risk profile. In the past, this was not a major issue as applications came almost exclusively from traditional financial institutions.

However, as fintech and crypto companies have recently begun requesting master accounts under new types of bank charters (e.g., crypto-focused banks), the Fed has moved to establish clear review guidelines. In August 2022, the Federal Reserve Board issued its final guidelines for evaluating master account access requests. These guidelines consist of six evaluation principles and a three-tiered review framework, with the core objective of establishing a consistent, risk-based evaluation system. The principles include broad factors such as whether the applicant △is legally eligible (an eligible institution under the Federal Reserve Act) , △will not pose excessive credit, operational, or cyber risk to the Fed, △will not create stability risks for the payment system as a whole, △will not undermine the financial stability of the U.S. financial system, △will not facilitate illicit activities like money laundering or terrorism financing, and △will not negatively impact the Fed’s implementation of monetary policy. Meanwhile, the three-tiered framework classifies institutions as follows: Tier 1 includes traditional, federally insured banks (lowest risk); Tier 2 includes institutions that are not federally insured but are subject to strict federal-level supervision; and Tier 3 includes novel institutions that are neither insured nor federally supervised (highest risk). This framework ensures that institutions in higher-risk tiers undergo a more thorough and cautious review. This implies that innovative, newly chartered banks (e.g., special-purpose banks handling cryptocurrencies) would likely fall into Tiers 2 or 3, and the Fed has clarified that it will exercise significant discretion and not grant accounts automatically, even to legally eligible institutions.

2.3 Fed Policy Background: Enhanced Transparency and a Cautious Stance

The emergence of non-traditional financial firms has been a major factor in bringing the master account issue to the forefront. The Fed noted the “need to respond to the emergence of novel charters at the national and state levels in recent years” when developing its guidelines, which includes crypto-custody banks chartered through the OCC’s national trust bank framework and fintech banks, such as Wyoming’s Special Purpose Depository Institutions (SPDIs). Meanwhile, in late 2022, the U.S. Congress required the Fed to create a public database of master account applications, which now transparently discloses which institutions have applied and been approved on a quarterly basis. This was also a response to criticisms that the Fed might be arbitrarily blocking innovative firms’ access.

Nevertheless, a cautious approach has prevailed within the Fed. In its final guidelines, the Fed made it clear that “legal eligibility does not entail a right to an account,” reaffirming that decisions would be made at the discretion of the individual regional Federal Reserve Banks. In practice, the Fed prioritizes the impact on financial stability and soundness over unconditionally paving the way for innovative financial firms. Concerns were raised that if claims for automatic approval based solely on eligibility were accepted, it could lead to a “race to the bottom,” where institutions with weak charters from states with lax regulations could easily gain access to central bank accounts. In this context, while the Fed has not explicitly prohibited new types of banks from holding master accounts , it has established a high bar and a multi-faceted review process for actual approval, seemingly to prevent systemic risks from premature access.

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3. Ripple’s Business Overview and Recent Moves

Ripple is a fintech company founded in the U.S. in 2012, which has focused on international remittance and payment solutions using its proprietary crypto-asset, XRP, and the XRP Ledger (XRPL) blockchain network. Ripple built a payment network called RippleNet to process interbank global remittances quickly and cheaply, offering an On-Demand Liquidity (ODL) service that utilizes XRP as a bridge currency. In simple terms, Ripple’s technology emerged as an alternative to the SWIFT network for banks, promoting that using the XRP token could significantly reduce costs by completing cross-border remittances in seconds without intermediary banks. In the process, Ripple secured hundreds of financial institution partners worldwide, establishing itself as a leader in the field of blockchain-based real-time international transfers.

Recently, Ripple’s moves have been noteworthy in two aspects: business diversification and regulatory response. First is its expansion into the stablecoin and central bank digital currency (CBDC) sectors. Since 2023, Ripple has been participating in CBDC pilots with various central banks while also starting to develop its own dollar-pegged stablecoin. In October 2024, it officially launched the Ripple USD (RLUSD), a stablecoin pegged to the U.S. dollar. RLUSD is issued at a 1:1 ratio with the U.S. dollar, aiming to be used for institutional payments and liquidity management, backed by the credibility of Ripple as the issuer. While its initial scale was not large, RLUSD has grown into a top-tier stablecoin, trailing the world’s largest stablecoins (with an estimated market cap of around $470 million as of mid-2025).

Notably, RLUSD is regulated by the New York Department of Financial Services (NYDFS) and is 1:1 backed by reserves of physical U.S. dollar deposits and short-term government securities, an effort to build high credibility in terms of regulatory compliance and investor protection. This move into the stablecoin business is interpreted as a strategy for Ripple to evolve into a comprehensive fintech platform that encompasses not only its existing XRP-based solutions but also the market for digital assets pegged to fiat currencies.

Second is its proactive approach to the regulatory environment. After a lengthy legal battle with the U.S. Securities and Exchange Commission (SEC), Ripple resolved some regulatory uncertainty regarding the utility of XRP in 2023 (a court ruled that programmatic sales of XRP did not constitute securities), giving it breathing room to advance its business. Subsequently, Ripple has sought to establish a framework for legally expanding its business within the U.S., asserting that “regulatory compliance is in Ripple’s DNA”. As part of this effort, in early 2024, it acquired Standard Custody & Trust, a New York-chartered crypto-asset custody company, making it a subsidiary. This institution is a trust company licensed by New York financial authorities and has provided digital asset custody services to institutional investors; by acquiring it, Ripple has secured an institutional financial license.

Following these preparations, in July 2025, Ripple made the bold move of applying to the OCC for a national trust bank charter and, simultaneously, for a Fed master account. Ripple’s management described this as an attempt to set a “new standard of trust for the stablecoin market,” expressing their commitment to operating a transparent and secure stablecoin under the supervision of federal and state regulators.

In summary, Ripple is at a strategic turning point, evolving from a cross-border payment solutions company into a stablecoin issuer and a specialized crypto bank. This is seen as a symbolic case of the shift in the cryptocurrency industry from a long-standing ethos of “avoid regulation” to one of “embrace regulation”.

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4. Why Ripple Needs a Master Account

Why is Ripple going to such lengths to obtain a central bank master account? The reasons can be examined from both a technical necessity and a business strategy perspective.

First, it is to enhance the credibility and stability of its stablecoin, RLUSD. Currently, private stablecoins, including RLUSD, hold their customer-deposited dollars in diversified assets like commercial bank deposits or government securities. However, this exposes the stablecoin’s reserve assets to risk in the event of a bank failure or financial crisis. Indeed, during the collapse of Silicon Valley Bank (SVB) in March 2023, a portion of the reserves for the major stablecoin USDC held at the bank was frozen, causing its price to temporarily drop below $1 and creating market turmoil. To eliminate this credit risk at its source, Ripple wants to deposit RLUSD reserves directly into a Fed master account. Money held in a Fed account is a direct liability of the central bank, backed by the full faith and credit of the U.S. government, and is thus recognized as a risk-free asset equivalent to cash, with no risk of bank default. Ripple CEO Brad Garlinghouse stated, “By holding RLUSD’s reserves directly at the Fed via a master account, we will have an additional, future-proof safeguard that further strengthens confidence in RLUSD”. In short, securing a master account would elevate the creditworthiness of the RLUSD stablecoin to a level comparable to that of sovereign currency, allowing it to position itself as a differentiated safe-haven asset compared to competitors like Tether or USDC.

Second, it is to strengthen its competitive edge in the payments business in terms of speed and cost. Ripple’s core service of international remittances and payments ultimately involves the movement of fiat currency. Until now, while Ripple has encouraged partner banks to transact with each other using XRP as an intermediary, interbank account transfers or local payment network settlements were still necessary in the end. Because Ripple itself is not a bank, it could not directly clear its customers’ fiat currency payments within the U.S. and always had to go through an intermediary bank or a payment partner. However, if Ripple obtains its own banking license and a master account, it could directly participate in the Fed’s payment systems, like Fedwire, and exchange money directly with other financial institutions. For example, if Ripple were to offer U.S. dollar transfer services with a banking license, it could settle payments instantly by transferring customer funds from its own Fed account to another bank’s Fed account. This would be faster and cheaper than existing methods that rely on intermediary banks or delayed settlement. Particularly for a company with a global network like Ripple, gaining access to the central bank’s payment system would be advantageous for implementing 24/7 real-time international payments. Fed accounts can be used under certain conditions even during non-business hours, and access to new systems like FedNow (the Fed’s real-time payment system launched in 2023) would also become possible, potentially making Ripple’s payment services equal to or even superior to those of traditional banks.

Third, it is a strategic objective to enhance regulatory credibility and expand its business scope. While the crypto industry once had the motto of “replacing banks,” Ripple has instead decided to “become a bank”. This can be seen as a strategy to proactively respond to the changing regulatory landscape and grow the business by gaining institutional trust. In fact, stablecoin legislation pursued by the U.S. Congress encourages large stablecoin issuers to obtain federal bank charters , and regulatory bodies like the Fed and the OCC are showing signs of accepting stablecoins under a sound regulatory framework. For Ripple, becoming an institution supervised by multiple agencies—the Federal Reserve, the OCC, and the NYDFS—through a master account and a bank charter would significantly reduce regulatory risk and allow it to operate on a level playing field with traditional financial companies. This would be positive for attracting customers (especially institutional investors) and would also place it in a favorable position for future expansion into other payment businesses (e.g., providing CBDC infrastructure, managing security tokens). CEO Garlinghouse noted that “Congress is creating clear rules of the road and banks are changing their tune [on crypto] and are leaning in,” expressing his ambition to stand shoulder-to-shoulder with traditional banks in the future. In summary, a master account is not just a piece of technical infrastructure for Ripple but also a badge of regulatory trust, through which Ripple aims to position itself as a bridge between the crypto-asset industry and the established financial world.

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5. Comparative Case Study: Custodia Bank and the Fed’s Decision

There are precedents of companies attempting to obtain a Fed master account before Ripple. A prime example is Custodia Bank, a Special Purpose Depository Institution (SPDI) established in Wyoming in 2020. The SPDI is a new type of bank charter created by the state of Wyoming as part of its crypto-friendly policy, specializing in digital assets while not being FDIC-insured and not engaging in lending activities. Soon after its establishment, Custodia (initially named Avanti) applied to the Fed for a master account and also requested Fed system membership, but in January 2023, the Fed officially denied the bank’s membership application. The Fed stated that the denial was because Custodia Bank was “uninsured and proposed to engage in novel and untested crypto activities that include issuing a crypto-asset on open, public networks, which presents significant safety and soundness risks”. In essence, the Fed pointed out that “Custodia’s novel business model and proposed focus on crypto-assets presented significant risks and were inconsistent with safe and sound banking practices”. It also assessed that the bank’s risk management framework, including its anti-money laundering (AML) systems, was insufficient for its heightened risk profile. The bank challenged the Fed’s decision in court, but in April 2024, a federal court dismissed Custodia’s lawsuit, affirming the Fed’s discretionary authority and stating that “the Fed is not required to grant a master account to every eligible institution”. The judge sided with the Fed, expressing concern that “if the Fed had no discretion to deny applications, it could result in a moral hazard where states could create minimally regulated charters to gain easy access to the central bank’s system”.

The Custodia case was a clear precedent showing how the Fed views specialized crypto banks. The Fed expressed concerns about the bank’s stablecoin issuance plans (its proprietary ‘Avit’ token) and its DeFi-like business activities, viewing its innovative model, different from traditional finance, as an additional risk. Furthermore, with Custodia’s Fed membership being denied, a master account was effectively not issued either (while non-members can still apply for a master account, the supervising Kansas City Fed reportedly never opened the account). During this process, the crypto industry pushed back, accusing the government, including the Fed, of waging an “Operation Chokepoint 2.0” to cut off crypto firms’ access to banking. After the court loss, Custodia’s CEO, Caitlin Long, criticized the ruling as “a victory for those who want to stop the crypto-banking combination” and vowed to appeal. Ultimately, however, the Custodia case confirmed the high bar set by the Fed for innovative crypto banks.

Ripple’s case has both similarities to and differences from Custodia’s. First, in terms of legal charter type, Custodia is a state-chartered bank (SPDI), whereas Ripple is seeking a federal OCC charter. A national trust bank charter issued by the OCC, although a non-depository special-purpose bank, is federally supervised, making it likely to fall into the Fed’s Tier 2 category. In contrast, Custodia was a state bank without federal supervision, placing it in Tier 3 and thus subject to much stricter scrutiny from the Fed. Second, there is a difference in business models. Custodia promoted DeFi-like innovation (e.g., issuing its own token) from its inception, whereas Ripple has a relatively proven business model that has been operating for over a decade. Its XRP-based payment network is used by numerous financial institutions, and its RLUSD stablecoin was issued with approval from New York regulators. This means Ripple is in a more favorable position than Custodia regarding its regulatory compliance track record.

Third, the policy environment has changed. When Custodia applied between 2020 and 2022, both the Fed and Congress were skeptical of cryptocurrencies, and clear laws and guidelines were lacking. By 2025, however, the U.S. Congress has advanced and passed stablecoin regulation bills like the aforementioned GENIUS Act , and the Fed has established its own framework by issuing the master account guidelines. Notably, the GENIUS Act includes provisions to bring large stablecoin issuers under the supervision of the OCC and the Fed , aligning Ripple’s current move with this new regulatory framework. Circle (the issuer of USDC), which had voluntarily withdrawn its application for a banking license in 2023, reapplied for a national trust bank charter in 2025, seeking to enter the regulatory fold. As the policy sentiment shows signs of shifting from “blocking” to “integrating,” it is possible that Ripple’s case could yield a different result than Custodia’s.

Of course, variables remain. The Fed’s concerns about stability could also apply to Ripple. The price volatility of crypto-assets like XRP, stablecoin operational risks, and cybersecurity threats are all areas the Fed will scrutinize closely. The Fed has the authority to attach conditions to a master account if needed (e.g., setting deposit limits, not paying interest) or to restrict or close the account if it poses a risk, even after granting it. In the worst-case scenario, a rejection like Custodia’s cannot be ruled out, but given that the Fed has already gone through a legal battle, it is expected to make a more deliberate decision based on clearer criteria this time. In short, the Custodia case served as a lesson and a preparatory guide for Ripple, which is now re-attempting its bid with higher compliance standards and a federal-level charter.

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6. Overview of the Stablecoin Market and U.S. Policy Trends

To understand Ripple’s master account application, it is necessary to examine the growth of the stablecoin market and its regulatory environment. A stablecoin is a cryptocurrency with a stable value, typically designed to be pegged 1:1 to a fiat currency like the U.S. dollar. Tether (USDT) and USD Coin (USDC) are prominent examples, widely used as an intermediate currency replacing the dollar in crypto trading and utilized for various purposes such as decentralized finance (DeFi) and international remittances. The stablecoin market has grown rapidly since around 2018, with the global market capitalization exceeding approximately $250 billion in 2025, a record high. The market reacted strongly to the passage of a stablecoin regulation bill in the U.S. Senate, with the total market cap surging by over 20% in a short period on expectations of institutional integration.

In response to this rapidly growing market, policymakers have begun to establish formal regulations. In the U.S., a 2021 report from the President’s Working Group on Financial Markets (PWG) recommended that “payment stablecoins should only be issued by trusted institutions such as banks”. Subsequently, Fed Chair Powell also stated that “stablecoins can have a role in the financial system if they are properly regulated,” emphasizing the need for congressional legislation. In 2023-2024, both the Republican and Democratic parties introduced their own stablecoin bills in Congress, and after deliberations, a bipartisan consensus bill, the GENIUS Act, was passed in the Senate in mid-2025. This bill (formally named the U.S. Stablecoin Innovation Act) is considered the first comprehensive regulatory framework for stablecoins in the U.S., with the following key provisions:

• Introduction of a dual federal-state regulatory system: Stablecoin issuers must either be chartered by a federal regulator (like the OCC) or by a state, provided that the state’s supervisory regime is substantially compliant with federal standards. State supervisory frameworks will be reviewed and approved by a federal certification committee and subject to periodic reviews to minimize discrepancies between states.
• Clarification of reserve asset requirements: Issued stablecoins must be fully backed 100% or more by cash or highly liquid assets (such as U.S. Treasury securities) , and issuers are required to publicly disclose their reserve holdings on a monthly basis. This is intended to prevent issues like the Terra collapse (an algorithmic stablecoin) and a lack of reserve transparency.
• Strengthened role of the Federal Reserve: As the ultimate authority for payment settlement, the Fed will have the power to monitor the systemic impact of large stablecoins and, if necessary, impose additional safety measures on issuers or determine the scope of account services provided. The Fed will also work with the Treasury Department and other agencies to establish reciprocal approval procedures for foreign-issued stablecoins.
• Other consumer protection and innovation provisions: Measures include prohibiting unfair practices, protecting reserve assets through segregation, and monitoring financial crimes (adopting AML innovations in collaboration with FinCEN). A grace period before full implementation is also included to mitigate the impact on existing stablecoins in circulation.

As of July 2025, this bill has also passed the House and is reportedly awaiting the President’s signature. If it becomes law, it will usher in a new era in the U.S. where stablecoins are recognized as a legitimate form of payment and operate under the supervision of the central government. This is seen as a turning point for the cryptocurrency industry moving from the shadows into the mainstream, as well as a moment when the boundaries with traditional finance will blur. While stablecoin supporters anticipate that the law’s passage will “usher in an era of instant remittances anytime, anywhere using stablecoins” , skeptics worry that “the close ties between the crypto industry and the banking system could create new channels for systemic risk contagion”. Despite this debate, the direction has been set towards acceptance through regulation, and cooperation and technical integration between banks and stablecoin issuers are expected to accelerate.

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7. Evolution of the Fed-Crypto Industry Relationship and Policy Signals

The relationship between the Federal Reserve (Fed) and the cryptocurrency industry over the past several years has been a series of tensions and explorations. Although the crypto-asset market grew after the Bitcoin boom in 2017, the Fed maintained its distance, holding the basic position that “crypto-assets are speculative tools, not currency”. Traditionally, the Fed’s supervision was limited to institutional finance, such as banks, and crypto companies had almost no direct contact with the Fed. The “The Narrow Bank” incident in 2018 marked the beginning of the Fed-fintech master account issue, when the Fed’s delayed approval of a master account for TNB, a narrow bank operating solely with reserves, sparked controversy. This is considered the first instance of the Fed showing its cautiousness towards non-bank innovation.

Between 2019 and 2020, regulatory alertness reached an extreme high with the announcement of the Facebook-led Libra stablecoin project. Fed Chair Powell warned that Libra could not “go forward” until its concerns were addressed, and Libra was eventually scrapped due to global regulatory pressure. As the crypto market exploded in 2021-2022 with the rise of DeFi and NFTs, the Fed and other financial authorities began to worry about the links between cryptocurrency and the traditional financial market. The Fed advised banks to apply special diligence when dealing with cryptocurrency-related business , and after the Terra-Luna collapse in 2022 and the FTX bankruptcy in 2023, there were even moves to recommend that banks reduce their exposure to crypto firms. Some critics labeled this “Operation Chokepoint 2.0,” an accusation that the government was pressuring the crypto industry through banking channels. The serial collapse of crypto-friendly banks like Silvergate and Signature in March 2023 further heightened these tensions.

However, at the same time, the intersection between finance and the crypto industry was inevitably growing. Major banks like BNY Mellon entered the digital asset custody business , and firms like Fidelity launched Bitcoin investment products, as Wall Street began to offer crypto services. In response, the Fed began to shift its stance from passive prevention to active regulation. In 2022, the Fed released its own CBDC research report, indirectly suggesting a competitive dynamic with private digital currencies by stating, “a CBDC could lower demand for stablecoins” if one were introduced. However, with the short-term implementation of a CBDC looking difficult due to technical and privacy issues, the judgment that it would be more realistic to bring private stablecoins into a manageable framework began to take hold.

It is against this backdrop that the aforementioned master account access guidelines (2022) and the stablecoin legislation (2025) emerged. In its guidelines, the Fed drew a line, stating that “legal eligibility does not automatically grant an account,” yet it also increased the transparency of the application process and left the door open for various types of banks. Meanwhile, as Congress moved to establish a clear supervisory framework for stablecoins, the Fed showed its support. Fed Chair Jerome Powell testified before Congress that “it’s a good thing that [stablecoin regulation] is happening,” and that “we do think that we need a strong federal role”. This is interpreted as the Fed having settled on a position of embracing the industry under sound regulation rather than outright rejection.

Ripple CEO Brad Garlinghouse’s comment that “banks are no longer shying away from crypto companies but are looking to partner with them” reflects this change. In the past, some banks were reluctant to open accounts for cryptocurrency exchanges or firms, but now there is a visible trend of trying to onboard large crypto companies as clients or to collaborate with them. For example, Nasdaq and Morgan Stanley are also preparing to enter the crypto custody market, and Visa and Mastercard are conducting stablecoin payment experiments, blurring the lines between big tech, traditional finance, and crypto. The Fed, in turn, will likely seek to strike a balance between establishing new risk management systems to respond to these changes and embracing innovation domestically to prevent it from moving offshore.

As a policy signal, the very fact that the Fed is reviewing Ripple’s master account application signifies its willingness to officially engage with the crypto industry. If the Fed still maintained a hardline stance, it might have rejected or delayed the application from the outset. However, it is reported that the OCC has accepted the application and the Fed has begun the process. This indicates, at the very least, a willingness to review it with interest. Furthermore, although debates over crypto-asset regulation continued in U.S. politics around the 2024 presidential election, the bipartisan agreement on the stablecoin bill signifies that a consensus has formed to bring the “crypto-dollar” into the institutional fold. Whatever decision the Fed makes, it seems clear that the relationship between cryptocurrency and traditional finance is moving from a phase of confrontation to one of coordination and integration.

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8. Implications of the Ripple Case for the Industry and Regulators

Ripple’s bid for a Fed master account offers a profound precedent for both the cryptocurrency industry and institutional finance. The implications can be summarized as follows:

• A paradigm shift from “replace the bank” to “become the bank”: Since the advent of cryptocurrency, the industry atmosphere was strongly inclined to distrust traditional banks and replace them with decentralized finance (DeFi). However, Ripple is seeking to integrate into the most traditional central banking infrastructure. This shows that blockchain companies can, based on their needs, embrace a role within the existing financial order. It is a symbolic example of the decline of crypto-fundamentalism and the rise of a pragmatic, hybrid approach.
• Enhancing stablecoin trust by guaranteeing safety: If Ripple secures a Fed account and deposits RLUSD reserves with the Fed, it would lead to an unprecedented boost in stablecoin credibility. Stablecoins have long been criticized for weaknesses such as reserve transparency and the credit risk of the issuer, but if the central bank itself holds the funds, they would achieve a level of stability comparable to a CBDC. This could become a new benchmark for other stablecoin issuers. In the future, USDC or Tether might also seek to obtain a Fed account if they meet regulatory requirements, which would trigger a competition for safety among private stablecoins. Ultimately, this could contribute to improving the credit of the entire stablecoin market and enhancing user protection.
• Potential for a rush of crypto firms into banking: With Circle and Ripple already vying for bank charters and Fed accounts, other large cryptocurrency companies may consider similar moves. For instance, the exchange Coinbase has explored obtaining a banking license in the past, and firms serving institutional clients might also seek trust or payment bank charters. As one observation puts it, “Crypto wanted to overthrow banks, now it’s becoming them,” suggesting that as the lines between crypto firms and banks blur, the competitive landscape will change. Existing banks may find themselves competing directly with fintech crypto firms on one hand, but on the other, they could also acquire or partner with them to offer new services (e.g., international remittances, digital asset custody). In other words, the industry landscape is poised for a reorganization.
• Dilemma and expanded role for regulators like the Fed*: The Ripple case is a double-edged sword for regulators. Granting approval raises concerns about new risks, while denying it invites criticism for stifling industrial innovation. The Fed might consider a compromise, such as a conditional approval or a small-scale pilot. For example, it could permit the use of the Fed account only for RLUSD reserves while restricting its use for other crypto-related activities. Whatever the decision, the Fed will take on new responsibilities as a supervisor in this area. If approval is granted, the Fed will have to constantly monitor the crypto bank, sending a message to the entire market. Other applicants may line up, and the Fed will be burdened with applying consistent standards to each case. Ultimately, the Fed will have to carry out the mission of “embracing innovation while building a safety net,” which will be a significant test for its future policy.
• A catalyst for institutional reform and legislation: The Ripple case also offers lessons for the U.S. Congress and lawmakers worldwide. It demonstrates the confusion that arises when institutions fail to keep up with reality. Although the law in the U.S. was just being established at the time of Ripple’s application, without it, the confusion seen in the Custodia case would have likely continued.

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9. Conclusion: Outlook and Recommendations

Ripple’s challenge to obtain a master account is currently under review, so the final outcome is uncertain. This conclusion will forecast the potential repercussions of both an approval and a denial.

Outlook if Approved: Ripple would become the first cryptocurrency company with a central bank account in history. From a regulatory perspective, this would be a historic event marking the integration of the crypto industry into institutional finance. Ripple would likely increase its stablecoin market share by significantly boosting the credibility of RLUSD. Other stablecoin issuers (like Circle) would actively pursue bank charters and Fed accounts, and the competitive landscape of U.S. stablecoins would likely change. Traditional banks might accelerate their strategies to respond to these new rivals, such as issuing their own stablecoins (e.g., the current USDF consortium formed by some banks) or pursuing collaborations. Politically, it would signal that the Fed has begun to cautiously approve cases on a case-by-case basis, potentially encouraging other special-purpose banks from crypto-friendly states (e.g., Kraken Bank) to re-apply. Globally, other central banks might consider opening their doors to providing direct accounts to fintech firms, referencing the U.S. precedent.

However, the Fed would likely operate Ripple’s account under strict conditions. For example, it could limit its use to holding RLUSD reserves or not pay interest on the account balance. Nevertheless, the overall signal to the industry would be positive. Crypto companies would gain confidence that “cooperation with regulators works” and would more actively adopt regulation-friendly business strategies. Investors’ trust in stablecoins and the crypto market would also increase, positively contributing to market expansion. Meanwhile, financial stability authorities would remain vigilant. As private digital money grows, the Fed would also need to monitor its impact on monetary policy transmission and liquidity management. Therefore, even after approval, the refinement of regulation would need to continue.

Outlook if Denied: If the Fed ultimately rejects Ripple’s application, a short-term blow to the cryptocurrency industry is expected. The strategy of regulatory accommodation would lose momentum, and distrust that “the government is excluding cryptocurrency” could spread again. Ripple’s business plans would also be disrupted, forcing it to revise its RLUSD expansion strategy. Across the stablecoin industry, the view that institutional integration will take more time could emerge, potentially slowing market growth. From a policy perspective, it would be seen as a signal that the Fed is maintaining the conservative stance it took with Custodia, which would discourage similar attempts by other companies. On the other hand, with legislation now in place, Congress might pressure the Fed to grant conditional approval or provide clearer guidelines. For example, if the Fed denies the application for specific reasons, Congress could respond with supplementary legislation or oversight inquiries to address those issues.

Recommendations: Regardless of the outcome, this case demonstrates that communication and coordination are essential at the intersection of regulation and innovation. For the cryptocurrency industry, it is important to build trust through its own efforts, faithfully comply with regulatory requirements, and keep constructive communication channels open with authorities. Regulators, in turn, need to adopt an approach that manages risks while drawing innovation into the institutional fold, rather than simply blocking it. This is how financial stability and innovative growth can be harmonized. As the Fed’s master account is a powerful tool held only by the central bank, a social discussion on how much to lower its threshold should continue. Ultimately, under the “same activity, same regulation” principle, similar financial services, whether traditional or innovative, should be subject to similar regulations. Ripple’s challenge is likely to contribute to narrowing the gap between this principle and reality.

Finally, from a Korean perspective, it is recommended to preemptively overhaul domestic policy while keeping a close watch on global digital asset standards. South Korea needs to prepare by drawing a big picture of whether to embrace private innovation into the system, like the U.S., or to respond with a central bank-led CBDC. Furthermore, it is necessary to explore the use of regulatory sandboxes or international cooperation to ensure that domestic financial companies and fintechs do not fall behind in the fields of international payments and stablecoins. The Ripple case is not just a story from another country; it is likely to present similar challenges to South Korea in the near future. Amidst the grand trend of convergence between cryptocurrency and traditional finance, we must watch the direction of the Ripple case and wisely prepare our response strategy