Kraken Granted Approval for “America’s First Crypto Bank”

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In Brief
  • The U.S. state of Wyoming has approved Kraken's application to become the world's first regulated crypto bank.

  • Kraken Financial will offer U.S. residents retail and investment banking services in crypto using an online and mobile-first model.

  • The regulatory approval is the first concrete attempt to midwife a fully interconnected financial ecosystem bridging crypto and fiat.

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Crypto exchange Kraken has received regulatory approval to form the world’s first fully regulated crypto bank in the U.S. state of Wyoming.

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In an announcement early on Wed 16 Sep., Kraken revealed that the new institution, tentatively called Kraken Financial, will be a Special Purpose Depository Institution (SPDI).

The approval marks the second time a crypto-financial firm has successfully received a banking charter and underlines Wyoming’s burgeoning reputation as a crypto innovation hub.

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Similar to a traditional bank, Kraken Financial will offer depository, custodial and fiduciary services, but also for crypto assets.

Bridging Crypto and Traditional Finance

According to Kraken, the new bank will offer customers the opportunity to pay bills and receive salaries in cryptocurrency. It will also provide U.S. Kraken Exchange users access to crypto investment services and tools alongside seamless switching between fiat and crypto.

An SPDI bank charter is similar to a custody bank charter in that it focuses on providing customers with secure custody-focused services and transaction gateways to regulated securities and commodities markets.

The major difference, however, is that it offers these services in crypto, which could potentially open up new frontiers for convergence in both fiat and crypto finance.

Unlike a custody bank whose customer deposits are only insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC),  Kraken Financial is required by Wyoming to maintain 100% reserves of its fiat deposits at all times.

This effectively makes the bank immune to a bank run regardless of the size of its loan book.

Kraken Financial’s Services

According to the announcement, the new bank intends to offer customers the ability to deposit fiat and crypto using an online and mobile-first model. In its first year, it says it will offer digital asset custody, Demand/Deposit Accounts (DDA), and wire transfer and funding services.

Over the next few years, Kraken says it will introduce enhanced digital asset custody offerings, digital asset staking, and trust accounts and administration.

It also plans to introduce a full-service internet and mobile banking suite, a crypto debit card, corporate account management services, wealth management, and treasury services, and potentially new asset classes altogether, such as securities.

For the time being, Kraken Financial will only be available to U.S. residents using web and mobile. Its sole physical location will be in Cheyenne, Wyoming, which will house critical in-house teams and functions such as an around-the-clock customer support center.

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David is a journalist, writer and broadcaster whose work has appeared on CNN, The Africa Report, The New Yorker Magazine and The Washington Post. His work as a satirist on 'The Other News,' Nigeria's answer to The Daily Show has featured in the New Yorker Magazine and in the Netflix documentary 'Larry Charles' Dangerous World of Comedy.' In 2018, he was nominated by the US State Department for the 2019 Edward Murrow program for journalists under the International Visitors Leadership Program (IVLP). He tweets at @DavidHundeyin

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