Cryptocurrency exchange Kraken has secured approval from a state regulator in the US to launch a crypto bank under an SPDI charter. The San Francisco-headquartered firm has received formal notice from the Wyoming Division of Banking that the application of its subsidiary was accepted.
Kraken applied for a bank charter under Wyoming’s special-purpose depository institution law. It will tentatively do business under the name ‘Kraken Financial’.
An SPDI bank charter permits Kraken to operate an independent bank that will reduce reliance on third-party financial institutions and allows the exchange to provide 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,” a post on Krakens blog states.
In its first phase of operation, Kraken Financial will only offer accounts to U.S. residents.
Krakens expects to serve as a compliant bridge to the U.S. dollar payments system and a custodian of digital assets. However, it will be required to comply with all federal and state laws, including ‘know your customer’, anti-money laundering and related regulations. It will also comply with Wyoming’s SPDI and digital asset laws, which include requirements that fiat deposits be 100% reserved and meet the consumer protection standards.
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Avanti Also Competes for a Similar License
Wyoming has been developing its crypto initiative since 2018 when it announced plans to draft special-purpose banking legislation to cater to crypto companies. Now, the state already has a comprehensive framework and supervisory process in place for cryptobanking licenses, which does not exist elsewhere.
Earlier this year, the state regulator began taking applications to charter a new type of crypto-friendly bank. Shortly after, Kraken alongside a handful of firms have indicated their intent to apply.
Avanti Financial Group, founded by Wall Street veteran and Wyoming Blockchain Coalition founder, Caitlin Long, was also floated as one of the key players seriously pursuing charters from the state banking division.
Headquartered in Cheyenne, Avanti was established through a partnership between Long and Blockstream, a software company that has ties to some of the big names in Silicon Valley. The company is expected to get off the ground sometime in early 2021.
Kraken, a cryptocurrency exchange operating from the United States, has recently expanded its operations in Europe and Asia. Last week, it also re-launched its trading services for Japanese residents, nearly two years after it exited the lucrative market.
Furthermore, Kraken’s UK subsidiary, Crypto Facilities, has received authorisation from the UK Financial Conduct Authority to operate a multilateral trading facility (MTF).