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PACE Act would give regulated crypto payment firms direct access to Fed payment rails
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Today they go through banks, reportedly paying up to 100x the Fed's own fees
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Eligibility is narrow — Circle, Ripple, and large exchanges would qualify
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Bipartisan and backed by crypto industry groups, but banks are pushing back
Every day, stablecoin issuers move billions of dollars. However, none of that actually goes directly through the “Fed Rail” or US payment system. Stablecoins have been forced to move through the payments system via proxies, banks, since inception. And it has been expensive. Reportedly, banks can charge up to 100 times what they themselves pay the Fed, just to let issuers in on their access. But maybe not for long.
A new, bi-partisan, bill called the Payments Access and Consumer Efficiency (PACE) Act was introduced by representatives Young Kim and Sam Liccardo from California this week. It would allow regulated crypto payment firms access to the Fed Rail on the same terms as banks.
First Class Citizens of the US Payment System
Making crypto payment companies first class citizens of the US payment systems doesn’t only mean lowered costs. With direct access, companies can execute payments on their own terms which improves both speed and availability. 24/7 access with settlement in seconds. Rep. Kim commented on the on the bill:
For too long, digital asset payment companies have been locked out of the same financial infrastructure that their competitors have access to. The PACE Act allows qualified nonbank providers to obtain direct access to Federal Reserve payment rails, enabling faster, less expensive, and more competitive payment services for American consumers and businesses.
This bill would let these payment companies apply for a single licence if they’ve obtained 40+ state money transmitter charters. The thresholds in the bill makes access to this licence narrow, by design. Only companies already operating nationally would qualify. For example Circle, Ripple and large crypto exchanges.
However, this wouldn’t mean any nation wide player could access this, it would just open up the possibility. There would still be the same rules and regulations regarding things like custody, segregation of funds etc. that applicants need to live up to.
Support and Opposition
Of course, support is strong within crypto. Blockchain Association, Crypto Council for Innovation, The Digital Chamber and Financial Technology Association all back this. But there’s, at least, equal opposition from banks and bank lobbying groups. And it bears to be repeated that this has only been introduced and has a long way to go before it’s passed.
The PACE Act is narrow in scope and has bi-partisan authorship which gives it a decent chance. If passed, stablecoin transactions can become cheaper for the consumer, it can become faster and more available.
The GENIUS Act cleared up regulation with regards to issuance, redemption and prohibition of yields on stablecoins. The CLARITY Act is moving through the Senate to get passed and would classify stablecoins in their own regulatory category. The PACE Act, then, would fit nicely into a group of acts making stablecoins neatly embedded into the largest economy in the world.
