Kraken Crypto Exchange to Revolutionize Traditional Banking with the Launch of Its Own Bank for Digital Assets – Here’s What You Need to Know


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Leading crypto exchange Kraken is finally taking its first steps into the banking business with the new Kraken Bank

“We’re building a new kind of crypto & bitcoin bank for our clients,” said the exchange on its website. The USA-based bank is called Kraken Financial, but “due to overwhelming demand, it will be known as Kraken Bank,” it said. 

It claims that the bank is designed to prioritize asset custody and safekeeping through the Wyoming Special Purpose Depository Institution (SPDI) framework.

It stated that,

“We’re looking into products like deposit accounts in USD and crypto assets (ex. Bitcoin), multiple funding and payments options, institutional custody products (qualified custody for advisors and broker dealers), IRAs and many more.”

Furthermore, it claims it can guarantee strict regulatory oversight, security standards, and data protection, arguing that,

“We’re willing to bet we’re more secure than your regular bank.”

Kraken stated that all SPDI banks must keep their reserves full, meaning that user money cannot be lent out without user permission. In its FAQ, the exchange further explained that an SPDI is a bank overseen by the Wyoming Division of Banking.

The investments will not be insured by the Federal Deposit Insurance Corporation (FDIC), but all assets will be available as cash or the least risky, most liquid cash equivalents, meaning that there will not be an insolvency risk the FDIC is intended to safeguard, it claimed.

“We will also maintain significant capital reserves and surpluses of our own capital to cover the full balance of all clients, even in the event of a “bank run””, said the company.  

The first SPDI licenses

This is possible as Wyoming, USA, granted Kraken a license to create a Special Purpose Depository Institution in that state. The exchange stated that,

“We’re the first (ever) crypto company to be awarded a U.S. state banking charter.”

Marco Santori, Chief Legal Officer at Kraken, noted the exchange’s bank charter application in September 2020. “Kraken just won approval to create America’s first crypto bank,” he said at the time.

Then on Monday, the exchange said that Kraken Bank is not open yet but is on its way. The company plans to have a phased launch, adding that:

“We will initially focus in the U.S. roll out services to existing clients in the U.S., with potential international expansion in the future.”

It will be an online-only mobile device service, without any in-person activities. 

Kraken further promises to promote digital asset adoption and improved client experience through its bank via “a more integrated” connection between crypto and the traditional financial system. 

The Silvergate

It is very important to note that this follows a (seemingly endless) string of crypto companies crashing and/or facing major financial, legal, and regulatory issues – perhaps most notably for this story, the crypto bank Silvergate

In early February, Silvergate shares saw a sharp drop in pre-market trading following the news that US officials had launched a probe into its dealings with fallen crypto giants FTX and its parent company Alameda Research

Silvergate was among the lenders hit the hardest by the FTX fall, suffering a bank run and having to sell $5.2 billion of debt securities at a significant loss to cover around $8.1 billion in user withdrawals. As a result, it incurred a $718 million loss, reportedly exceeding the bank’s total profits since 2013. 

And just last week, Silvergate announced that it could not file its annual financial report to the US Securities and Exchange Commission (SEC) on time and that it is evaluating its ability to stay in business.

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