Cryptocurrency exchange Kraken has just obtained approval on its application to create the first U.S.-based crypto bank, the firm said in a blog post on 16 September.
According to the announcement, the Wyoming Banking Board approved on Wednesday Kraken’s application for a Special Purpose Depository Institution (SPDI), making it the first crypto firm to become a bank. Called Kraken Financial, the new institution is the first SPDI bank in the state, which can now “provide comprehensive deposit-taking, custody and fiduciary services for digital assets”.
The CEO of Kraken Financial, David Kinitsky, said in a statement:
“We’re thrilled to work in a state so aligned with our philosophy and values. Wyoming is a rare and shining example of how thoughtful regulation can drive innovation for FinTech companies.”
By receiving an SPDI approval, Kraken Financial will not only be able to offer its clients more products, but also operate in more jurisdictions, thanks to its position as a state-chartered bank. The firm can now operate in other states without having to go through each state’s compliance plan, thanks to its new regulatory passport.
The firm now expects to have its revenue increase due to the new services and fees. Though it is unknown how much capital the firm had to raise for its application, the Division of Banking recommends that applicants secure between $20 million and $30 million. Furthermore, SPDI banks are forbidden from lending, and also has to hold 100% of its assets in reserve.
Unlike trust companies, which can have its assets claimed by a judge during bankruptcy, SPDI banks can only hold digital assets while never having legal ownership of them. As such, if the bank goes bankrupt, the funds have to be returned to its customers. The team behind the firm said:
“Kraken is developing policies and procedures to ensure that when it acts as a Qualified Custodian for investment professionals, under applicable federal and state law, it will do so in full compliance with all applicable laws and rules. We believe the SPDI lays the groundwork for this for the first time as a state-chartered bank, instead of many trust companies which provide custody, but not discretionary fiduciary services.”
Earlier this year, Kraken partnered with Bnk to the Future, in order to hold a private sale of its stock. While it remains unknown if the sale had anything to do with the SPDI application, only “selected” individuals were approached with the offer to buy the company’s stock, with a minimum investment amount of $1,000.