“Why do we want a crypto bank to be licensed?”
For veteran bankers asking that question, the answer may not be found easily – until they speak with Jan Owen, one of Kraken Bank’s Board of Directors. Speaking the same language to regulators, legislators and veterans of the financial services industry is one of the many tools Owen brings to the table.
If you aren’t familiar with the story – Kraken Bank worked closely with the Wyoming State legislature, helping build from scratch a first-of-its-kind institution and setting in place a clear and functional framework now viewed by many states as a gold standard.
What you haven’t heard is how Jan brought a depth of regulatory experience to the task, not to mention the confidence of a tough-but-fair straight shooter who believes Kraken’s approach can benefit the future of financial services.
In her decades-long career, Jan has served as commissioner for California’s Department of Corporations, Business Oversight as well as the state’s Department of Financial Institutions. Owen now sees it as a responsibility to use her experience and wisdom to shepherd in this next wave of innovation for the benefit of all Kraken clients.
Please enjoy this interview that Kraken conducted with Jan Owen.
You have an incredible resume that includes experience in accounting, asset recovery, auditing, budget preparation, benefits administration and financial reporting. Can you tell us about how cryptocurrencies fit into all of those fields as well as the ways you see this technology improving them?
During my time as commissioner, I started to learn more about cryptocurrencies thanks to Jesse Powell and his efforts in educating California’s financial services regulators. Then, I saw my institutions start to dabble in crypto.
They were curious about how to add crypto to their offerings. They were coming to me asking for education and wanted to know, how do we do this right? How do we protect our customers but also offer new products? I saw my banks become interested in solving problems related to the crypto custody. In many cases, they had no idea what cryptocurrencies were or what to expect.
In response, we needed to find out how cryptocurrencies would fit into the financial services market, not just in California but across the country.
What financial services challenges can crypto and Kraken Bank solve?
Financial institutions are increasingly interested in digital assets, but they are also looking for ways to mitigate their risk. For example, let’s say an institution’s income is based only on overdraft fees. Is there a way crypto can help you diversify?
The crypto market has always looked lucrative during bull markets, until the bear markets arrive. Naturally, this volatility has been a discussion point with investors and customers. This means these conversations color how financial institutions – mostly depositories – have thought about the sector.
The other question, of course, is how do you license or prepare the industry for a licensed entity that does crypto. Enter Kraken Bank. In many discussions with bankers, a common question was, ‘Why do we want a crypto bank to be licensed?’ My answer has always been, ‘You want to be licensed because you want a level playing field.’ You want a company that offers some of the same products and that has a responsible licensing regime like the SPDI.
In many cases the banks that we have talked to aren’t ready to make the total leap to banking crypto but they’re not as afraid. You’re trying to convince the bankers not to be afraid of it. So we talk about the benefits, the deterrents, as well as the risk.
Can you explain a little more about what regulators look for in their review process. How do you see Kraken Bank fitting into a regulated environment?
It is the responsibility of regulators to ensure the safety and soundness of depository institutions, and to protect the assets of their customers – be they retail, investment or business clients.
Crypto is growing so fast and rapidly becoming mainstream, but the question for regulators always comes back to how you protect customers. Most institutions are not ready to have a crypto bank or handle crypto products. A lot of the remaining work that needs to be done is education and that is why Kraken Bank and the Wyoming SPDI are so important.
What are some of the most interesting parts of this challenge that you will be tackling alongside the rest of the executive team?
I have a reputation of being a tough but fair regulator. I hope to be able to use that for the benefit of Kraken. We were able to do that when we were in front of the banking commission of Wyoming where we made the presentation of how important it is to be a regulated entity. We talked about how we are responsible to our communities and responsible to our investors. I also get to explain that crypto isn’t scary. They are different, they can be complex, the algorithms definitely are complex – they’re supposed to be – but the structure of the exchanges is familiar.
What is your elevator pitch to the average consumer learning about crypto? What about institutions and regulators?
If you are an interested consumer, don’t put your full savings in it. First, go to the exchange you are mostly comfortable with — I would tell you to sign up with Kraken. Put in enough money for you to watch the transaction, but only what you can afford to lose.
For any speculative investment, you have to have the desire. You have to be interested, you can’t just have dollar signs in your eyes and think it’s going to make you a small fortune.
Why did you decide to join the board of the Kraken Bank? What excites you about digital assets?
I initially look at it through the lens of a safe movement of value in a different form. I have seen cryptos moving the Fed to look at how to move money faster, better, easier and safely. They’re not quite there yet but they’re getting there.
Jesse spent hours explaining crypto to me. He knew it would be a very important part of changing the way people view financial markets, products and services.
I’ve been watching the evolution from passbooks to ATMs, to paying your bills online, to my son who only does his finances on his iPhone. Now, we are seeing different types of currencies that meet different needs.
Look at what cryptos have done to ACH programs. They have to become more nimble. I had a money movement program ask if I wanted to do it in Bitcoin. I’m seeing an increase in value to pay a bill or send money to a family member in a fast, safe way. Crypto does that. I just see it as an evolution of next steps.
Thank you Jan!
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