For more than fifteen years, every fintech company that wanted to move money in the United States has had to partner with a sponsor bank. That structure is deliberate. It was built for a financial system in which moving money and holding deposits sat inside the same institution, and the regulatory categories reflected that bundling.
But as software-native financial products emerged, the framework didn’t expand to recognize new categories of providers. Instead, those providers were folded into a banking model that pre-dates the internet.
The PACE Act of 2026 is the first serious legislative attempt to give qualified nonbanks an alternative path to the federal payment rails that doesn’t require routing through a sponsor bank.
For builders of programmable dollar infrastructure, PACE is confirmation that direct rail access is now a recognized federal category that runs in parallel to the sponsor-bank model rather than depending on it.
A New On-ramp To The Rails#
Access to U.S. payment rails has required every fintech company to work with a bank sponsor. Fintechs that aren't banks themselves partner with sponsor banks holding master accounts at the Federal Reserve. The bank provides access; the fintech extends services to its users.
This is currently the only regulatory pathway available, and it comes with structural constraints. A nonbank provider’s settlement speed, pricing, and product capabilities are all bounded by the parameters of whichever sponsor bank it partners with, and end users see the variation in their fees, settlement times, and product consistency.
The Payments Access and Consumer Efficiency (PACE) Act of 2026, introduced on April 21 by Reps. Young Kim (R-CA) and Sam Liccardo (D-CA), opens a second pathway for qualified nonbank payment providers to access Federal Reserve systems. The sponsor-bank model continues as before, and most providers will continue to use it; PACE simply adds a parallel option for those that meet a higher regulatory bar. The same Fedwire Funds Service, FedNow Service, and FedACH infrastructure that banks use would, under PACE, also be available to qualified nonbanks directly.
The PACE Act comes on the heels of 2025’s GENIUS Act, which established a federal framework for stablecoin issuance and custody. PACE does the same for payment rail access. Because the two bills share definitions and risk standards, a provider operating under GENIUS and PACE can adopt a single, coherent compliance posture rather than relying on a patchwork of policies adapted from legacy finance.
This new posture means that faster, more transparent, and more composable payments will become available to consumers and businesses.
What the Bill Actually Does#
The PACE Act establishes a new legal category: the “registered covered provider.” To belong to this category, a company must hold:
- At least 40 active state money transmitter licenses.
- A state depository institution charter OR a state credit union charter.
These requirements act as a “pre-vetting” for eligible companies seeking to register. The OCC evaluates applications according to a set of factors, including financial resources, Bank Secrecy Act compliance, and, critically, whether the applicant demonstrates a benefit to the public through innovation, competition, and broader access to payment services.
Then, once the OCC has granted the license, the Federal Reserve approves or rejects the payments reserve account covering Fedwire, FedNow, and FedACH. The Fed must approve or deny within 120 days, after which approval is granted automatically.
Access Comes With Responsibility and Oversight#
Registration is the entry point of regulatory oversight. Once approved, registered covered providers operate under a continuous and demanding set of obligations, including reserves, custody requirements, fair-access mandates, and insolvency protections that, in some respects, exceed what customers receive in other corners of the financial system.
“Registered covered providers” must maintain 1:1 reserves backing all outstanding customer obligations in strictly defined liquid assets: U.S. currency, Fed account balances, short-term Treasuries, overnight repos, government money market funds, and tokenized equivalents. These reserves cannot be rehypothecated. Customer funds held in custody must be segregated and cannot be commingled with the provider’s own assets.
In addition, the OCC retains full examination authority and can enforce requirements under the same statutory authority it uses against insured depository institutions.
The PACE Act also includes an explicit fair access obligation: providers may not deny services or cancel accounts based on a customer’s constitutionally protected beliefs, affiliations, or political views. All access decisions must be individualized, objective, and risk-based.
In insolvency, customer payment obligations rank ahead of all other liabilities except administrative costs, and properly segregated custodial assets sit entirely outside the estate. Arguably, consumers have stronger statutory protections under the provisions of the PACE Act than they do in many other financial contexts.
PACE is not a deregulatory bill. It defines a higher bar than the current sponsor-bank model imposes on most fintechs, and it makes that bar continuous rather than situational. Compliance becomes a property of the institution itself, not a downstream artifact of a banking relationship.
PACE + GENIUS: Deliberate Policy Architecture#
The PACE Act sits alongside the GENIUS Act stablecoin framework as part of a broader 2026 rewrite of U.S. payment infrastructure policy. PACE explicitly cross-references GENIUS definitions and risk management standards, establishing a shared regulatory foundation between the two pieces of legislation.
GENIUS established stablecoin issuance and custody as a directly chartered federal activity. PACE does the same for payment rail access. Together, they create a coherent federal category for programmable dollar infrastructure that sits alongside the bank category rather than within it. Congress is responding to calls for a new class of institution to operate in parallel to existing ones, replacing the patchwork of one-offs and workarounds that has accumulated over the past decade.
The bill also amends five federal securities laws to clarify that balances held with registered covered providers do not constitute securities, removing a legal ambiguity that has historically made nonbank payment product development less viable.
The Real Story Is Infrastructure, Not Access#
The temptation is to read PACE as a “fintech access” bill, a regulatory upgrade that lets a few qualified nonbanks join the club. That framing misses the bigger change.
PACE recognizes a payments architecture that operates in parallel to the bank-mediated one. Correspondent-banking models will continue to handle the workloads they were designed for, including international rails, FX, and the long tail of payment types where bank intermediation remains the right answer. PACE adds a directly chartered category alongside that model for software-native financial products that need instant, conditional, programmable settlement that are properties of an infrastructure layer, not features that retrofit cleanly onto batch-processing back ends.
For builders, the implications are immediate. Qualified-nonbank eligibility is a compliance posture, not a corporate transformation. Providers that have already built around continuous attestation, real-time monitoring, segregated custody, and audit-ready controls are in a fundamentally different position than providers that treat compliance as a periodic reconciliation.
The PACE bar is high, but it is the bar that compliance-as-code architectures already meet by design.
The same is true on the settlement side. Programmable settlement ( T+instant flows, conditional release, AI-orchestrated routing across rails) is a property of an infrastructure layer built natively against federal rails. PACE recognizes that posture as a federally chartered option, sitting in parallel to the sponsor-bank path rather than displacing it.
The PACE Act is good policy. It is rigorous where it needs to be: strict reserves, explicit consumer protections, continuous regulatory oversight, and insolvency rules that put customers first. It is also genuinely productive in removing an artificial structural barrier that currently inhibits competition and imposes unnecessary costs on consumers.
But the lasting effect of PACE will not be measured in how many fintechs eventually clear the qualified-nonbank bar. It will be measured in what happens to the rest of the market once direct rail access is no longer hypothetical.
Pricing power redistributes across more participants. Builders gain an architectural choice between the sponsor-bank model and direct rail access, and they can pick the path that fits their product rather than defaulting to the only one available.
For the next generation of programmable dollar infrastructure, that question has already been answered.
Dakota’s infrastructure assumes direct rail access as the architectural default, not the regulatory exception. With $3B+ processed across 700+ customers, we built the architecture for the world PACE is creating before it had a regulatory shape.