Kraken Crypto Exchange Receives Unique Charter to Operate As A Bank
Kraken, a prominent U.S.-based cryptocurrency exchange, has received approval from the State of Wyoming for its proposal to form a new kind of financial institution: an exchange empowered to carry out some of the functions of a private bank.
Kraken announced this new development on its website on September 16, 2020, detailing the exact nature of its new authorities. The company is planning to reorganize its structure into Kraken Financial, as the first business to be designated a Special Purpose Depository Institution (SPDI) in accordance with state and federal law. The State of Wyoming, where Kraken is based, has given the firm all of the rights of a standard bank charter, which will allow it to take deposits, operate payments systems and custody cryptocurrency for individuals, businesses and regulated entities, among other new offerings.
There have been many difficulties and sources of friction between the crypto community and the banking industry, from minor everyday inconveniences in actually moving crypto and fiat around to sustained institutional hostility, with banks in the early years of Bitcoin using their political capital to try and foster a regulatory environment inhospitable to cryptocurrency. The inauguration of Kraken Financial will allow customers a great deal of fluidity in moving between fiat currencies and various crypto assets, alongside other similar ease-of-use updates, but this is only scratching the surface of the potential applications for this type of business.
Kraken Financial hopes to build a bridge between the separated worlds of traditional finance and crypto, allowing users to perform such actions as paying bills and receiving salaries in cryptocurrency, incorporating cryptocurrency into investment and trading portfolios, as well as an immediate turnaround in converting fiat to crypto and back again. More sophisticated financial tools such as trust management and even crypto-based debit cards are planned for the future, so according to Marco Santori, Kraken’s chief legal officer.
24. With @Kinitsky at the helm, Kraken hopes to offer:— Marco Santori (@msantoriESQ) September 16, 2020
-Digital asset custody
-Checking and savings accounts
-Online and mobile banking UIs
-Account management services
-Little chained-up pens; and
The unique charter made for Kraken’s SPDI model is more similar to a custody bank than a community one, meaning that its primary focus will lie in asset custody and things like regulated securities and commodities, rather than safeguarding customer deposits and giving out lines of credit. Still, it hopes to operate in an accessible manner for a wide array of customers, and mentioned that it maintains a 100 percent reserve of all deposits in fiat currency.
With Kraken Financial’s explicit goal of cementing together the disparate aspects of the worlds of traditional finance and cryptocurrency, their newfound bank charter could become a substantial step in the normalization of bitcoin and other assets on a truly mass and global scale. As far as potential goes, it could very well be the case that Kraken opens up branches nationwide in the next several years.