Kraken Will Be The First Crypto Bank

Kraken Wins Bank Charter Approval

It was announced yesterday that Kraken, one of the earliest crypto exchanges, has received approval from the state of Wyoming to build the country’s first crypto bank.

This is likely to be another milestone moment in Bitcoin’s continued, multi-decade march towards global reserve status.

The key here is that the Kraken Financial bank will be allowed to do everything your traditional bank does — “deposits, operate payment systems, and, of course, custody crypto for individuals and businesses and even some regulated entities” — but it will not be allowed to participate in fractional reserve lending. According to Kraken’s Chief Legal Officer Marco Santori, “Fractional reserves create risks that, in the US, trigger the Bank Holding Company Act and FDIC supervision under the FDI Act.”

In the first year of operation, Kraken hopes to offer the following services:

• Digital asset custody
• Demand/deposit accounts (DDAs)
• Wire transfer and funding services

Over time, this list of products and services will hopefully expand to include:

• Enhanced digital asset custody offerings
• Digital asset staking
• Trust account and administration
• Other services for individual accounts:
• A complete online and mobile banking suite of products
• A debit card that clients can use to spend their crypto funds
• Other services for corporate clients:
• Account management services
• Bank comfort letters
• Deposit verifications
• Proof of funds attestations.

You can read more about the exact details on the Kraken blog post. My general thoughts on this are that most people are drastically underestimating this development. They don’t understand the differences between a traditional bank and a crypto bank.

David Kinitsky, CEO of Kraken Financial, said:

“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.”

The announcements are steeped in regulatory language and lawyer-speak. If they are paying attention at all, they probably know something happened with Kraken in Wyoming, but the gravity doesn’t resonate.

The big breakthrough will be if Kraken can deliver a digitally-native banking experience that blends the line between legacy assets and digital assets.

Can users have a single checking or savings account that supports both fiat and Bitcoin?

Can they hold any digitized stock, bond, currency, and commodity in the same bank account? Will the bank allow for 24/7/365 operations and transactions?

The idea of a crypto bank is not interesting if we merely recreate a replica of the traditional banking system. It becomes compelling when we leverage the advantages of crypto assets to create an improved banking experience that serves customers globally.

It feels like Kraken is working towards the new, improved experience, rather than simply trying to build a legacy bank with Bitcoin custody.

Side note: Wyoming is incredible for working so hard to make this happen. I know it wasn’t just one person, but Caitlin Long and many others deserve incredible kudos for making it possible for Kraken to get to this point.

The world of possibilities is endless.

This will be fun to watch and I’m rooting for Jesse, Marco, and the rest of the Kraken team to thrive under their new approved license.