Kraken cryptocurrency exchange of US: gets a banking licence!

All kinds of things happening. One expected digital currencies/exchanges to replace central banks and banks.  However, crypto exchanges seem to be applying for a bank charter instead.

Kraken, one of the oldest and largest crypto exchanges has received a bank charter:

We are thrilled to announce that the State of Wyoming has approved Kraken’s application to form the world’s first Special Purpose Depository Institution (SPDI), tentatively called Kraken Financial.

Headquartered in Cheyenne, Wyoming, Kraken Financial is the first digital asset company in U.S. history to receive a bank charter recognized under federal and state law, and will be the first regulated, U.S. bank to provide comprehensive deposit-taking, custody and fiduciary services for digital assets.

From paying bills and receiving salaries in cryptocurrency to incorporating digital assets into investment and trading portfolios, Kraken Financial will enable Kraken clients in the U.S. to bank seamlessly between digital assets and national currencies.

This new institution will be regulated in largely the same manner as other U.S. banks.

Hmm.

Why did it apply for a bank charter? To push for payments in cryptos:

 Why did Kraken decide to apply for an SPDI charter?

Kraken’s vision is to become the world’s trusted bridge between the crypto economy of the future and today’s existing financial ecosystem.

An SPDI bank charter permits Kraken to build this bridge in-house. With the charter in place, we can operate a fully independent bank that will reduce our reliance on third-party financial institutions and even help launch a new wave of innovative products for our users. A bank fully dedicated to the interests of our users is, without a doubt, the best way to deliver on this vision.

Wyoming’s approach to regulation is unique among programs anywhere in the world, its careful tailoring balancing the interests of digital asset innovators and their clients.

Though many regulators talk about fostering innovation, Wyoming is the only state to actually build out this vision in a concrete, commercially viable way.

This is more like a narrow bank with deposits backed by 100% reserves in guess what? Fiat money!

4. How is an SPDI different from a traditional commercial bank? Is it regulated differently?

There are several different kinds of banks. A traditional community bank exists to serve its local community through safeguarding customer deposits and lending those deposits to meet the credit needs of its neighbors and small businesses.

Other kinds of banks, called “custody banks” provide services that are more focused on asset custody and providing a safe, trusted gateway for customers to conduct transactions in regulated securities and commodities markets. Custody banks are among the largest U.S. banks.

The SPDI is a custody bank in the same way, but for digital assets like virtual currency. Both custody banks and community banks, however, are still ‘banks’ under federal and state law because they conduct deposit-taking activity.

Kraken Financial, as a bank, is required by Wyoming law to maintain 100% reserves of its deposits of fiat currency at all times. If every client were to demand withdrawals of their fiat at the same moment, Kraken Financial would be able to fulfill each withdrawal immediately without regard to how many loans we had outstanding.

This is the advantage of the SPDI charter, because the FDIC generally only insures deposits up to $250,000. For this reason, deposits will not be required to be insured by the FDIC.

Kraken Financial will be regulated in largely the same manner as other U.S. banks by the Wyoming Division of Banking. The Division is currently finishing development of the first regulatory manual for banks and digital assets, building on the standards in Wyoming and federal law.

  Lot more on the blog post

One Response to “Kraken cryptocurrency exchange of US: gets a banking licence!”

  1. pulsehyip Says:

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