Cryptocurrency DEX Kraken received approval from a state regulator in the U.S. to launch a crypto bank under an SPDI charter. According to the announcement on September 16, Kraken Financial, its new name, will have headquarters in Wyoming and be regulated by the Wyoming Division of Banking under a Special Purpose Depository Institution.
Under this system designed for cryptocurrency companies, Kraken will offer some banking functions to its customers and act as the exchange’s primary bank. Prior, these companies were third-party institutions.
Kraken Bridging Digital Assets and the USD Payment System
Dave Kinitsky, CEO of Kraken Financial, said that Kraken Financial would enable its clients in the U.S. to bank flauntless between digital assets and national currencies. They will pay bills and receive salaries in cryptocurrency, allowing them to invest and build portfolio trading.
In its first phase of operation, they will only offer accounts to U.S residents. Kraken expects to be a compliant bridge to the U.S. dollar payment system and digital assets. However, it must comply with federal and state laws inclusive of knowing your customer(KYC) and anti-money laundering, among others. Kraken will comply with Wyoming SPDI and digital asset laws, which include requirements such as fiat deposits be 100% reserved and meet consumer protection standards.
The Near Future of Kraken Financial
In October, the division and Promontory will publish the first manual for banks stating procedures and handling digital assets. Kraken Financial will also have the ability to operate in more jurisdictions by this time. It now has a regulatory passport into other states without dealing with a state-by-state compliance plan as it is a state-chartered bank now.
The exchange expects to get its significant revenue sourced from fees and services. SPDIs are not allowed to lend, and each of them has to hold 100% of its assets in reserve. Kraken has not disclosed how much equity capital it raised for application, but the Division of Banking encourages applicants to raise between $20 million and $30 million. A similar amount of money is at the de novo bank.
Having received the charter, Kraken aims at building out operations and personnel for the bank. About 10 to 25 department heads will start working. They have already hired the board, C-suite, and the rest to take place by the end of this month.
More Firms Applying for the Charter
After Kraken’s application, other firms started to show interest in applying for the charter. Avanti Financial Group, founded by Caitlin Long, was noted as one of the critical players thoughtfully pursuing the awarded charter. Headed in Cheyenne, Avanti was established off the partnership between Long and Blockstream and expected to open in October.