Amid the various downturns in the crypto market, including the fallout from Silvergate and the regulatory crackdown, US-based cryptocurrency exchange Kraken has revealed its plans to launch a banking institution.
This was revealed by Marco Santori, Chief Legal Officer of Kraken, in a podcast with The Block. This update comes as the crypto industry is experiencing a downward trend due to negative news from Silvergate and various reactions from regulators.
Kraken to launch its own bank
Marco on the Scoop Podcast says there is a plan to launch the first industry-focused bank. The chief legal officer added:
Kraken Bank is well on track to launch very soon. We’ll have those pens with the little ball chains. We’re going to order thousands of them and put them on the desks of Wall Street banks everywhere. With our logo.
The forthcoming bank being launched by Kraken has sparked speculation among the community about whether a bank originating in the crypto sector can be trusted, even after the crash of the once-known largest crypto exchange FTX.
The collapse has negatively affected confidence in the nascent sector. The mismanagement of client funds by its founder and CEO, otherwise known as Sam Bankman-Fried (SBF), led to the stock market’s downfall.
In addition, the Silvergate exchange network in the crypto industry has been compromised as this financial institution doubted its ability to continue operating; Santori said Kraken’s relationship with banks sees the exchange talking to different “groups of banks around the world.”
Adding that an increasing caution in banking in the crypto sector could hinder innovation within the ecosystem. “We are returning to an era where banks are very careful about what accounts they open,” said Santori, adding:
Wall Street will be fine. Kraken and Coinbase will be fine. But for the man or woman who has a new idea about providing infrastructure to the crypto economy, it will be a very difficult road for them in the coming years. No question.
Kraken’s recent saga with the SEC
This news comes particularly after Kraken’s recent settlement with the Securities and Exchange Commission (SEC). Earlier this year, the SEC accused the crypto exchange of violating security laws through its staking service.
The US regulator has sued the Kraken crypto exchange subsidiaries Payward Ventures Inc and Payward Trading Ltd for failing to register the crypto exchange staking-as-a-service program.
Months later, however, Kraken agreed with the SEC to pay a $30 million fine in disgorgement, conservatory interest, and civil penalties to shut down its crypto asset relocation program.
Regarding the staking program, which has now been discontinued, Santori noted that staking was a small percentage of Kraken’s revenue. “Obviously it has a pretty dramatic impact on our product mix in the US,” says Santori.
The executive asserted that the SEC’s performance of shutting down the stocking program will only push U.S. clients seeking offshore stocking services to riskier exchanges. Santori concluded:
It’s really indicative of a pretty unfortunate situation here in the United States. We have a regulatory environment that essentially forces users to use offshore exchanges that are happy to accept their business with as little as a VPN.
Meanwhile, the crypto market has not reacted significantly to Kraken’s announcement of the forthcoming crypto bank. The global cryptocurrency market capitalization continues in a downward trend, down almost 1% in the past 24 hours, to be valued at $1.073 trillion.
Featured image of Leaprate, chart from TradingView.