San Francisco-based cryptocurrency exchange Kraken has been granted a Special Purpose Depository Institution (SPDI) charter by the state of Wyoming.
What Happened: It is the first time that a U.S-based digital asset company has received a state- and federal law-recognized banking charter that offers custody services for digital assets, the company claimed in a statement.
“Kraken Financial,” as th company’s banking unit is dubbed, would act as a bridge between digital assets and national currencies and will be subjected to the U.S. banking regulations, it said. Initially, only U.S. residents will be permitted to open accounts. Over time, the company plans to expand globally.
Wyoming Governor Mark Gordon confirmed the move on social media.
Today Wyoming became the first state to approve a banking charter for digital assets. This will allow those using digital assets, like cryptocurrency, to access reliable financial services, protect consumers, and allow businesses a way to safely hold digital assets.
— Governor Mark Gordon (@GovernorGordon) September 16, 2020
Why Does It Matter: The cryptocurrency exchange’s decision to apply for the banking charter would reduce its dependence on third-party financial institutions.
The state approval will also allow the company to expand its product and services offering. The company plans to start with Digital Asset Custody services, Demand/Deposit Accounts, and Wire transfer and funding services in the first year of operations.
Over the years, the company also plans to expand in Trust accounting and administration services, services for corporate accounts, online banking and cryptocurrency debit card services for individual accounts with potential ventures into retail, wealth management, and treasury services over time.
What’s Next: As per the state law, since Kraken Financial will offer digital asset custody services, it’s required to hold fiat currency reserves equal to 100% of its deposits. This requirement will ensure that Kraken Financial can process customer’s withdrawal requests on demand, the company noted.
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