U.S-based cryptocurrency exchange Kraken, after settling with the SEC for $30 million dollars and ceasing its staking operations, is now back with news of creating its own banking institution.
Known as Kraken Bank, the crypto bank is the first one to be awarded by a U.S. state banking charter and will be based on the Wyoming SPDI framework (Special Purpose Depository Institution). Initially slated as a phased launch last year, the project was delayed, but Kraken now confirms that they are proceeding with the launch.
Kraken’s Chief Legal Officer Marco Santori revealed the launch of the exchange’s own bank in a podcast episode from The Block, where he explained the implications of recent regulatory actions in the U.S. to crypto firms. Santori claims that these regulatory moves tend to favor ‘incumbent’ players in the U.S. crypto space who already have an established foothold in the market.
This is a daring decision, given the recent scandal involving crypto-friendly bank Silvergate and its dealings with FTX, which was once the largest crypto exchanges in the industry, before it collapsed.
Santori noted that FTX’s collapse last year “shook the landscape” and made banks hesitate to support crypto companies. As the narrative goes, this then led to the current regulatory climate that forced users and traders in the U.S. to opt instead for offshore exchanges. 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 be available only to the exchange’s current clients, but Kraken has disclosed plans for expansion in its website. Kraken claims that is can provide assurance for potential clients 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 partner banks overseas.
Hey Wayne,
Kraken Bank is not open yet but on its way! The offering will initially be available to existing Kraken clients in the USA with potential international expansion in the future.
You can subscribe to Kraken Bank updates here 👉https://t.co/m3yPoGpu2g
Kraken Support 🐙
— Kraken Support (@krakensupport) March 6, 2023
At the time of writing, there have been 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 provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
Source: https://cryptodaily.co.uk/2023/03/kraken-continues-foray-into-banking-despite-regulatory-challenges