Kraken Wins Bank Charter Approval

We are thrilled to announce that the State of Wyoming has approved Kraken’s application to form the world’s first Special Purpose Depository Institution (SPDI), tentatively called Kraken Financial.

Headquartered in Cheyenne, Wyoming, Kraken Financial is the first digital asset company in U.S. history to receive a bank charter recognized under federal and state law, and will be the first regulated, U.S. bank to provide comprehensive deposit-taking, custody and fiduciary services for digital assets.

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 U.S. to bank seamlessly between digital assets and national currencies.

David Kinitsky, CEO of Kraken Financial, said:

“We’re thrilled to work in a state so aligned with our philosophy and values. Wyoming is a rare and shining example of how thoughtful regulation can drive innovation for FinTech companies.”

This new institution will be regulated in largely the same manner as other U.S. banks.

For more information on our initiative, we’ve assembled a full FAQ to share our goals for the future of Kraken Financial below:

1. Why did Kraken decide to apply for an SPDI charter?

Kraken’s vision is to become the world’s trusted bridge between the crypto economy of the future and today’s existing financial ecosystem.

An SPDI bank charter permits Kraken to build this bridge in-house. With the charter in place, we can operate a fully independent bank that will reduce our reliance on third-party financial institutions and even help launch a new wave of innovative products for our users. A bank fully dedicated to the interests of our users is, without a doubt, the best way to deliver on this vision.

Wyoming’s approach to regulation is unique among programs anywhere in the world, its careful tailoring balancing the interests of digital asset innovators and their clients.

Though many regulators talk about fostering innovation, Wyoming is the only state to actually build out this vision in a concrete, commercially viable way.

2. Where will Kraken Financial operate?

Kraken Financial will start locally, but will soon operate globally.

The SPDI charter will aid us in expanding Kraken’s reach across the United States, and will also help the broader Kraken organization to service companies around the world.

3. Can international persons apply for bank accounts?

In its first phase of operation, Kraken Financial will only offer accounts to U.S. residents. We hope to expand globally soon.

4. How is an SPDI different from a traditional commercial bank? Is it regulated differently?

There are several different kinds of banks. A traditional community bank exists to serve its local community through safeguarding customer deposits and lending those deposits to meet the credit needs of its neighbors and small businesses.

Other kinds of banks, called “custody banks” provide services that are more focused on asset custody and providing a safe, trusted gateway for customers to conduct transactions in regulated securities and commodities markets. Custody banks are among the largest U.S. banks.

The SPDI is a custody bank in the same way, but for digital assets like virtual currency. Both custody banks and community banks, however, are still ‘banks’ under federal and state law because they conduct deposit-taking activity.

Kraken Financial, as a bank, is required by Wyoming law to maintain 100% reserves of its deposits of fiat currency at all times. If every client were to demand withdrawals of their fiat at the same moment, Kraken Financial would be able to fulfill each withdrawal immediately without regard to how many loans we had outstanding.

This is the advantage of the SPDI charter, because the FDIC generally only insures deposits up to $250,000. For this reason, deposits will not be required to be insured by the FDIC.

Kraken Financial will be regulated in largely the same manner as other U.S. banks by the Wyoming Division of Banking. The Division is currently finishing development of the first regulatory manual for banks and digital assets, building on the standards in Wyoming and federal law.

5. What products and services will you offer?

Our offerings will evolve over time, but we plan to provide clients with everything they expect from a seamless banking gateway between digital assets and national currencies.

During its first year of operations, the SPDI plans to give clients the ability to deposit USD and custody digital assets at a regulated state-chartered bank. These banking services will be seamlessly integrated into the existing exchange services, providing clients better funding infrastructure, a better experience and enhanced regulatory clarity.

Additionally, because of our position as a bridge between crypto and traditional finance, we will offer the following crypto-focused services in our first year of operations:

  • Digital asset custody
  • Demand/deposit accounts (DDAs)
  • Wire transfer and funding services.

We anticipate supporting additional services over the next few years, including:

  • Enhanced digital asset custody offerings
  • Digital asset staking
  • Trust account and administration
  • Other services for individual accounts:
    • A complete online and mobile banking suite of products
    • A debit card that clients can use to spend their crypto funds
  • Other services for corporate clients:
    • Account management services
    • Bank comfort letters
    • Deposit verifications
    • Proof of funds attestations.

Finally, we expect to be able to offer additional retail, wealth management and treasury services (and potentially other asset classes such as securities), so stay tuned!

6. Will you have branches and a physical location?

We will have a permanent physical presence in Cheyenne, Wyoming, which will house many of Kraken Financial’s key back-office teams and functions.

Kraken will operate an online and mobile-first banking model. We want to make it as easy as possible for people to access and manage their money via a single-portal client experience regardless of the time of day or where they are currently located.

Customer service and support will be available 24/7/365.

7. Will you be offering qualified custodial services for broker dealers and funds?

Kraken is developing policies and procedures to ensure that when it acts as a Qualified Custodian for investment professionals, under applicable federal and state law, it will do so in full compliance with all applicable laws and rules.

We believe the SPDI lays the groundwork for this for the first time as a state-chartered bank, instead of many trust companies which provide custody, but not discretionary fiduciary services..

8. What does this mean for Kraken exchange clients?

New and existing clients will have the opportunity to apply for our traditional financial accounts. Upon completing the onboarding procedures, they will be able to quickly and seamlessly fund their accounts on the exchange.

Moreso, for the first time, they will be able to take advantage of the seamlessness and ease of use that comes from the first all-in-one service provider that can offer and expertly manage sophisticated crypto-products.

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