Kraken has won approval for the creation of a new US bank, bringing the traditional financial industry and cryptocurrency market closer.
In an announcement last week, the cryptocurrency exchange said the US state of Wyoming has approved an application to form the first Special Purpose Depository Institution (SPDI), a bank which will “largely” be regulated in the same way as a standard bank, according to the company.
The SPDI, likely to be named Kraken Financial, will be headquartered in Cheyenne, Wyoming. Managed under state and federal law, the bank “will be the first regulated, US bank to provide comprehensive deposit-taking, custody, and fiduciary services for digital assets,” Kraken says.
Kraken has previously relied on third-party financial services and products to facilitate wire transfers, but now the SPDI bank charter is in the place, the firm is able to develop solutions to form a bridge between crypto-based services and traditional banking in-house.
Wyoming’s SPDI charter is a framework designed with cryptocurrencies and other virtual assets in mind. A traditional bank will hold and protect customer deposits; whereas a custody bank may also deal with assets and market trading.
An SPDI bank will act as a custody bank, but for digital assets.
“It is likely that many SPDIs will focus heavily on digital assets, such as virtual currencies, digital securities, and utility tokens,” the Wyoming division of banking says. “SPDIs may focus on traditional assets as well.”
Cryptocurrencies are increasing in popularity and scope every year, but as they are not generally backed by physical assets — such as gold or fiat currency — and are susceptible to market fluctuations, the traditional financial industry has been slow to catch on to crypto’s potential.
“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 US to bank seamlessly between digital assets and national currencies,” the company says.
However, in a nod to traditional banking, Wyoming will require the new banking body to maintain 100% reserves of any fiat currency made by customers.
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Under an “online and mobile-first banking model,” Kraken will start by allowing customers to deposit USD and virtual assets, as well as conduct wire transfers. Over the next few years, the cryptocurrency exchange hopes to branch into account management, the creation of a debit card for spending cryptocurrency, digital asset staking, and wealth management.
At launch, Kraken Financial will only serve local residents, but the firm intends to take to the global stage in the future. It remains to be seen, however, if other states, countries, and financial giants will accept the SPDI framework and an organization offering blended crypto-fiat services easily.
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