Kraken Becomes the First Cryptocurrency Bank in the US, What Does This Mean?

Original title: What does It mean to be Kraken's first Us cryptocurrency bank?

Text author: Decrypt

Captain Hiroshi & NBSP;

According to Decrypt, which reported on September 18, the line between cryptocurrency exchanges and Banks will be further blurred. The state of Wyoming has granted the Cryptocurrency exchange The Kraken a license to establish a cryptocurrency bank in the state, temporarily naming it Kraken Financial.

This makes Kraken the first U.S. cryptocurrency exchange to create a bank. The bank is a "special purpose depository institution", which means that the Kraken can keep digital assets in escrow, operate payment systems, and allow customers to easily trade between fiat and cryptocurrencies.

Kraken Financial's customers are currently limited to US residents, who can pay their bills or get paid in cryptocurrencies, or hold them in their Banks. David Kinitsky, CEO of Kraken Financial, told Decrypt that the bank "is expected to launch this service later this year, but the most likely time is in early 2021 (q1)."

The Company also plans to roll out a number of new services in the coming years, including debit CARDS for cryptocurrency and staking.

Aken Financial, of course, is being given a licence with some limits: it will become a so-called "custodian bank", meaning it will not be able to make loans using customer deposits; In addition, Wyoming law requires the Kraken to keep all customers' savings at all times.

Kinitsky said.

We are currently prohibited from making dollar loans. There are provisions in the regulations that make it easy for us to know that our customers are borrowing digital assets, so we expect to do this type of lending. But Kraken has no plans for partial reserve lending.

So how does Kraken Financial make money? "The way to make money is going to be very traditional," Kinitsky said, adding that while "dollar-denominated yields are not that high" at the moment, Treasury bonds and other assets also pay a yield.

In addition to this, Kraken will also take a portion of the cryptocurrency fees deposited into its accounts, and will also charge a fixed fee for services such as wire transfers and inter-bank transactions.

He said:

This is a very standard way for Banks to make money outside the lending business. New products, qualified custodians, wealth management and other asset classes will also generate new income. But initially, it will be a very standard banking business model.

Krahen's new bank will also wean it off its dependence on third-party banking infrastructure. Is this to cut costs? "Yes, it's possible," Kinitsky said. "We'll see as we go."

Getting the permit will allow Kraken to apply for an account at the Fed. Krahen's legal director, Marco Santori, tweeted earlier today:

It can even apply for membership, which brings with it greater responsibilities and oversight by the Fed. This is a powerful tool and I hope it will be a must-have skill for all applicants.

But this has the added benefit of putting the Kraken in direct contact with the Fed. In that case, explains Nic Carter, a partner at Castle Island Ventures, "Krahen does not, in theory, need to rely on other Banks to do their statutory business. Although Kraken has a long way to go, it could eventually "offer services directly to those fiat Banks, which is a valuable proposition."

Santori explained earlier yesterday that the move will also bridge the gap between traditional finance and cryptocurrency finance.

He said:

A bank focused on cryptocurrency will create an efficient, transparent and accountable link between the traditional financial system and the cryptocurrency ecosystem.

Caitlin Long, a member of Wyoming's blockchain special committee, added on Twitter that the vote was "unanimous" and the whole process took a total of 27 months.

A few months ago, the OFFICE of the Comptroller of the Currency issued an open letter clarifying the idea that cryptocurrency companies would become Banks and saying that national Banks could gain custody of cryptocurrencies.

But Wyoming's firm crypto-currency-friendly stance paved the way for the creation of a cryptocurrency bank, which Carter says is no small achievement.

He said:

This is important because Wyoming has a series of laws that clarify the relationship between depositors and institutions in a clear legal way that was not previously clear. It is not clear, for example, whether customer deposits can be claimed by creditors in the event of a liquidation, whereas the SPDI method specifies this distinction.

But he also said the bill's main contribution was to "establish Wyoming as a cryptocurrency-friendly jurisdiction and provide some important legal clarifications on the nature of cryptocurrency collateral that I hope other states will adopt."

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