US-based Kraken Financial is unveiling what it plans to do with its new crypto banking license.
In a recent installment of the Unchained Podcast with host Laura Shin, Kraken Financial CEO David Kinitsky reveals the services that its retail consumers can expect once the company becomes operational.
“We are going to have direct access to the federal payment system and be able to more seamlessly integrate funding and withdrawal mechanisms and payment mechanisms into our products. And so they should see an increase in quality of customer experience, and perhaps a cost-benefit as well, and then they’ll really see the difference once we start launching new products. Things like debit cards backed by digital assets, things like staking, things like IRA accounts or other tax-advantaged accounts, things like wealth management and investment product services, the list goes on.”
The Kraken Financial head says the new benefits will not be limited to retail customers as the company also plans to offer its institutional clients banking features including qualified custody on top of other services.
Kinitsky also highlights that unlike traditional banks that take advantage of the fractional reserve banking system, Kraken Financial will be required under regulations to keep 100% reserves, which means that the company won’t be able to lend out the money of its depositors as a means to generate income. It will instead have to rely on other methods to survive as a banking institution.
“Even though you have 100% reserves, you still are able to earn some yield on US dollar-denominated assets via treasuries or other types of very highly rated securities that all banks invest in that are separate from the type of lending and portfolios that they conduct otherwise. Now in the interest rate environment, we’re currently in, it can be measly. Obviously, if you have a big scale of assets it can be material, but it’s not going to be the windfall money maker for us….
And then percentage fees on crypto assets that are safe kept or custodied with us. All of the new products that I mentioned earlier have revenue streams attached to them.”
Earlier this month, Kraken received a Special Purpose Depository Institution (SPDI) charter from the Wyoming Banking Board which enables the company to operate as an independent bank for crypto assets.
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