Kraken Crypto Exchange Plans Bank Launch
In a recent podcast episode of The Scoop, The Block's Frank Chaparro and Kraken Chief Legal Officer Marco Santori discussed the crypto exchange's plan to launch a bank.
Kraken's ultimate goal is to support other crypto companies finding it difficult to establish a relationship with banks.
US banks hesitant to accept crypto firms as new clients
Given increased crypto regulatory actions in the US, banks are hesitant about taking on cryptocurrency firms as new clients. The US Securities and Exchange Commission (SEC), led by Chair Gary Gensler, believes that most crypto assets offered by cryptocurrency companies are securities, thereby subject to regulation.
Following the unceremonious decline of major industry players such as FTX and BlockFi, the SEC has put the US-based segment of the industry under the microscope. Following a reported SEC probe of the Kraken crypto exchange over unregistered securities, the cryptocurrency trading platform agreed to pay a $30M fine.
This resulted in the Kraken suspending its staking operations with retail investors. This decision by the SEC did not go well with the community, investors, and even politicians.
That said, there is a silver lining for Kraken, and it is in the form of a recent incident involving Silvergate. In early March 2023, Silvergate 'missed' the deadline for 10K filings. This led the SEC to warn the bank about its capacity to carry on as a "going concern".
As a result, Ledger, Circle, Paxos Trust Company, Coinbase, and several other high-end industry clients publicly cut ties with the cryptocurrency bank. This led Kraken crypto exchange to decide to launch its own bank and support cryptocurrency firms.
Scrolling to the bottom of Kraken's website, you will see the Kraken Bank option. The facility has yet to be launched, but you can sign up for updates by filling out a short form.
According to the website, Kraken is "planning a phased launch in 2022". This may be a typing error, or the webpage needs to be updated with the latest content. It should be noted that the trading platform is the first cryptocurrency firm to be handed a US state banking charter.
Operating as an independent affiliate of the Kraken network of products, the “Bitcoin bank" will be based out of Wyoming, with a forward-facing regulatory framework. Good news may follow later this year.
Author: Surajdeep Singh
Surajdeep Singh has been working in the tech sphere as a marketing guru and journalist for over 6 years, with his speciality laying in blockchain and Web3. He has donned several hats in marketing and journalism over the years and worked with many reputable brands. Feel free to reach out to him on LinkedIn!