Representative virtual currency exchange Kraken entered the banking industry with the establishment of kraken bank.
“We are building a better kind of cryptocurrency and bitcoin bank for our clients,” the exchange said on its website. However, “due to overwhelming demand, it will become known as Kraken Bank,” the company said.
Kraken Bank claims it is designed for crypto via the Wyoming Special Purpose Depository Institution (SPDI) framework, which aims to allow banks to prioritize the custody and custody of their assets.
“We are looking at products such as US dollar savings accounts and crypto assets (such as Bitcoin), multiple funding and payment options, institutional custody products (eligible custody for advisors and broker-dealers), and IRAs. increase.”
Additionally, it claims to be able to maintain strict regulatory oversight, security standards, and data protection, claiming:
“We believe we are safer than your current bank.”
Kraken said all SPDI banks must keep their reserves full. In other words, it is not possible to lend out user’s money without user’s permission. In the FAQ, the exchange further explained that SPDI is a bank supervised by banks. Wyoming Bank Division.
Investment is not guaranteed by Federal Deposit Insurance Corporation (FDIC), however, claims that all assets are available as cash or the least risky and most liquid cash equivalents, meaning there is no bankruptcy risk that the FDIC is intended to protect. bottom.
“We will also maintain significant capital reserves and a surplus of capital to fully cover the balances of all our customers in the unlikely event of a bank run,” the company said.
First among SPDI licenses
The move was made possible by the US state of Wyoming granting Kraken a license to establish a special purpose depository institution in that state. The exchange said:
“We are the first (to date) crypto company to be awarded a US State Banking Charter.”
Kraken Chief Legal Officer Marco Santori noted that the exchange’s banking authorization application was filed in September 2020. Said at the time.
exchange too Added The Kraken Bank isn’t open yet, but it’s in the works. The company is planning a phased launch, adding that it will “initially focus on rolling out services to existing clients in the United States, with potential for international expansion in the future.” .
This is an online-only mobile device service with no face-to-face facilities.
Kraken further promises to facilitate the adoption of digital assets through banks and improve the customer experience by integrating cryptocurrencies with the traditional financial system “more seamlessly”.
The Crypto Predicament Continues
It is worth noting that this announcement follows a series of financial, legal and regulatory challenges facing numerous cryptocurrency companies. especially, silver gatethe crypto bank has encountered a serious problem.
In early February, pre-market trading in Silvergate shares took a hit after reports emerged that US authorities were investigating a deal with the bank. FTX and Alameda Researchboth of which are now defunct crypto companies.
Silvergate was one of the lenders hit hardest by the FTX drop, having been hit by a bank run and selling $5.2 billion in debt securities to cover about $8.1 billion in user withdrawals. had to suffer heavy losses. As a result, it reportedly suffered a loss of $718 million, more than the bank’s total profit since 2013.
And just last week, Silvergate announced that it would not be able to file annual financial reports in the United States. Securities and Exchange Commission (SEC) is evaluating its ability to execute on schedule and continue business.
It was reported shortly after Silvergate was forced to return $9.85 million to cryptocurrency lenders. block phi As part of ongoing bankruptcy proceedings.
As for Kraken, the company has reassured users that they have nothing to worry about regarding exposure to Silvergate.
Besides the Kraken, multiple other crypto companies including coin base, Paxosand galaxy digitalended its relationship with Silvergate last week.
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