US-based cryptocurrency exchange Kraken, after settling with the SEC for $30 million dollars and ceasing its staking activities, is now back with news of creating its own banking institution.
Known as Kraken Bank, the crypto bank is the first to be awarded by a U.S. state bank charter and will be based on the Wyoming Special Purpose Depository Institution (SPDI) framework. Originally planned as a phased launch last year, the project was delayed, but Kraken has now confirmed that they are going ahead with the launch.
Kraken’s Chief Legal Officer Marco Santori revealed the launch of the exchange’s own bank on a podcast episode of The Block, where he explained the implications of recent US regulatory action for crypto companies. Santori claims that these regulatory measures tend to favor “established” players in the US crypto space who already have a foothold in the market.
This is a bold decision given the recent scandal surrounding crypto-friendly bank Silvergate and its dealings with FTX, which was once the largest crypto exchanges in the industry before collapsing.
Santori noted that last year’s collapse of FTX “shook the landscape” and made banks hesitant to support crypto companies. As the story goes, this then led to the current regulatory environment forcing US users and traders to opt for offshore exchanges instead. This explains the recent move by Kraken and Santori sees the exchange as a gateway for onboarding newcomers to the crypto sector.
Kraken’s bank will initially only be available to the exchange’s current customers, but Kraken has announced plans for expansion on its website. Kraken claims it can offer potential customers security in terms of reserves, saying that “all assets will be kept on hand and available as cash or the least risky, most liquid cash equivalents.” Santori has also talked about Kraken having multiple foreign partner banks.
Kraken Bank is not open yet but on its way! The offering will initially be available to existing Kraken customers in the US with potential international expansion in the future.
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— Kraken Support (@krakensupport) March 6, 2023
At the time of writing, there are no significant reactions from the market and it remains to be seen how this move will be received by Kraken’s longtime users, the crypto community, and of course the SEC itself.
Disclaimer: This article is for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial or other advice.