Summary: Crypto exchange Kraken was granted permission by the State of Wyoming to open the first ever crypto bank on Wednesday, September 16. Kraken's application to become the world's first Special Purpose Depository Institution (SPDI) was approved early this morning, making it the first digital asset company to receive a bank charter recognized under state and ...
Crypto exchange Kraken was granted permission by the State of Wyoming to open the first ever crypto bank on Wednesday, September 16.
Kraken's application to become the world's first Special Purpose Depository Institution (SPDI) was approved early this morning, making it the first digital asset company to receive a bank charter recognized under state and federal law.
Named Kraken Financial, the new entity will be able to take deposits, operate payments systems and custody crypto for individuals and businesses alike. The team hopes to also offer checking and savings accounts, wire transfers, trust accounts, online and mobile banking UIs, debit cards, account management services, and deposit verifications, a recent Twitter thread from chief legal officer at Kraken, Marco Santori, outlined.
"A crypto-focused bank would permit an efficient, transparent and responsible nexus between the traditional financial system and the crypto ecosystem," Santori wrote.
The announcement promises that Kraken Financial will allow clients in the United States to bank seamlessly between fiat money and cryptocurrencies. The new entity will be regulated like any other custody bank, meaning, among other things, the bank will need to maintain 100% of its reserves of its deposits of fiat currencies at all times. However, it will not be allowed to lend funds.
The Wyoming Division of Banking is also working to develop the first regulatory manual for banks and digital assets, a resource which may prove helpful to other states looking to move in Wyoming's crypto-friendly direction.
“We’re thrilled to work in a state so aligned with our philosophy and values," David Kinitsky, CEO of Kraken Financial, said in the announcement. "Wyoming is a rare and shining example of how thoughtful regulation can drive innovation for FinTech companies.”
Santori's thread walked readers through the build-up to the historic announcement. The legal basis for the project started out with the Delaware Blockchain Initiative where various crypto and blockchain leaders pushed for a legal framework for blockchain projects. One early success was amending Delaware law to allow a corporation to rely exclusively on the contents of a blockchain for its stock ledger.
One member of the initiative and CEO of Avanti Financial Group, Caitlin Long, soon suggested the team pivot their efforts to Wyoming where she suspected they would have more success. Soon the Wyoming Blockchain Task Force was formed and the state has since become a hub for blockchain innovation. To date, Wyoming has enacted over 13 blockchain-enabling laws making it one of the only places with welcoming blockchain laws which encourage growth in the industry.
Kraken Financial acting as a state-chartered bank also means Kraken has a regulatory passport allowing it to operate in other states without having to deal with a patchwork state-by-state compliance plan, Kinitsky said in an interview with Coindesk.
Long has her own application pending for a crypto bank called Avanti Financial which she hopes to open in Wyoming in October. The State Division of Banking is also working with six other companies on charter applications which could be approved as early as 2021.
By Emily Mason