From Cannabis to Crypto: Federal Reserve Discretion in Payments

72 Pages Posted: 12 Apr 2023 Last revised: 1 Dec 2023

See all articles by Julie Andersen Hill

Julie Andersen Hill

University of Alabama - School of Law; University of Wyoming College of Law

Date Written: November 1, 2023


From its inception, the Federal Reserve has operated payment systems that let banks move money for their customers. Checks, wire transfers, and electronic consumer payments all happen thanks to the Federal Reserve. Congress by statute specified which banks get access to the Fed’s payment services. For more than a century, the Federal Reserve provided services to all legally eligible banks. But when the Federal Reserve received requests for payments access from a cannabis-focused credit union and a cryptocurrency custody bank (both of whom are legally eligible), it denied them. The Fed also issued sweeping guidelines claiming discretion to conduct risk-vetting and deny bank requests. These guidelines apply to all banks and reverberate far beyond cannabis and crypto.

This Article examines whether the Federal Reserve’s payments discretion is as great as it now claims—a question that has been raised in three recent cases, but never answered. It concludes the Fed has overstepped. The language and structure of the Federal Reserve Act require that the Federal Reserve provide payment services to all eligible banks. In support of this statutory interpretation, the Article excavates long forgotten legislative history and more than a century of sometimes hidden Federal Reserve payments practices. It shows that although the Federal Reserve has some discretion over the payments it processes and terms under which it offers it payments services, the Fed’s discretion is not so broad as to allow it to reject access requests from legally eligible banks. If the Fed wants to exclude banks, it should ask Congress to change the law.

Keywords: bank, Federal Reserve, payments, payment systems, financial regulation, financial institutions, credit unions, financial innovation, cryptocurrency, cannabis, marijuana, discretion

JEL Classification: K20, K22, K23, G1, G18, G28, L1, N2

Suggested Citation

Hill, Julie Andersen, From Cannabis to Crypto: Federal Reserve Discretion in Payments (November 1, 2023). 109 Iowa L. Rev. 117 (2023), U of Alabama Legal Studies Research Paper No. 4405139, Available at SSRN:

Julie Andersen Hill (Contact Author)

University of Alabama - School of Law ( email )

P.O. Box 870382
Tuscaloosa, AL 35487
United States

University of Wyoming College of Law ( email )

1000 E. University Ave.
Department 3035
Laramie, WY 82072
United States

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