The Wyoming Banking Board has granted crypto exchange Kraken a Special Purpose Depository Institution (SPDI) charter that’s recognized under federal and state law.
Founded in San Francisco in 2011, Kraken applied for the banking license under Wyoming state laws shortly after the state introduced a comprehensive framework earlier this year to make it easier and cheaper for crypto firms to expand their services. Going public with the historic approval in a blog post, Kraken tentatively calls the new venture Kraken Financial.
“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.”
With the SPDI charter, Kraken can now operate as a fully independent bank for digital assets, which will reduce its reliance on third-party financial institutions. Initially, Kraken Financial plans to provide its clients the ability to custody cryptocurrencies, deposit in USD and transfer their assets seamlessly, making it easier for clients to pay bills, receive salary in crypto, and incorporate digital assets in trading portfolios.
Later on, it expects to expand its offerings to provide wealth management and treasury services, debit card services, and custodial services for broker dealers.
Under Wyoming state laws, Kraken Financial will be regulated in the same manner as any bank would be. Aside from not being allowed to lend, Kraken will be required to keep 100% of its deposits in fiat currency at all times, so clients can demand to withdraw their money at any time regardless of outstanding loans the bank has. As a result, deposits will not require FDIC insurance.
Although the regulatory compliance process sounds long and tedious, the SPDI charter means that Kraken now has the regulatory passport to operate across state borders without dealing with state-by-state compliance laws.
For now, Kraken Financial can only cater to local clients, but soon expects to expand globally. Headquartered in Chayenne, Wyoming, Kraken Financial will be operated on an online and mobile banking model, making it possible for clients to manage their money 24/7.
Featured image: Shutterstock[artist’s name]