Bitcoin Forum

Kraken becomes a "bank" in the US:



The main point is the following:


This means that



This is a big news, in my opinion. Exchanges have been raising the bar of their services, insuring their  funds, elevating the service standard and there is a race to have a convergence of services between crypto exchanges and traditional banks, in a Darwinist race to stay relevant.
Banks are getting closer to exchanges(Hype in Italy allows you to buy and store bitcoins, while From 2020, the sale and custody of Bitcoin will be allowed to all German banks (https://bitcointalk.org/index.php?topic=5205355), and exchanges are getting closer to banks, like Kraken here.
It's a good news for institutional investors, but also for private ones.

I regularly advise users here, not to store their funds on exchange wallets, with the usual phrase that; 'not your keys, not your coins'. The same wound apply, even if the exchange has successfully linked the traditional financial system to the digital industry.
I would personally not want to keep bitcoins in a centralized banking system, but such custodial services have come to stay and could be a factor in Mass adoption;
Users who do not want to buy or hold Bitcoin directly, cause it is too complicated or technical, would now have a 2-in-1 system that allows them interact with fiat and cryptocurrencies directly.
Kraken as the first SPDI can also set the pace for Central banks to assimilate Bitcoin and the blockchain into its system

Kraken's US banking provision has always been pitiful as far as I can tell. This could give them a large boost.

I've never quite been able to figure out their regulatory status in most areas of the world though. Perhaps this will inspire them to clean all of that up no matter where they operate.

https://i.imgur.com/DMOOF0Z.jpg

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If they make it easy (albeit with KYC, etc.) to "spend" BTC via debit cards or whatever, that is huge news.

Especially for me if/when I want to cash some in.

Release the Kraken Bank!  They do this right, I'll go with 'em.

I see it more as small news in a very, very long term transformation of the banking industry. I don't see Kraken Financial or Wyoming entities in general  becoming particularly relevant in the financial industry. I think Bakkt (the ICE) getting a NY trust charter was a much bigger deal.

Inevitable as it is, I also don't love seeing exchanges become banks. ::)

This is a surprising news and and gateway for more transformation tp come with other exchanges to become a bank too. However, since it get mixed up with centralized for government approved of its use how could be the exchange promulgate decentralization in the cryptocurrency system? It will all be mixed up and I do not know which system will going to be follow either the decentralized system by cryptocurrency or the decentralized system from the government. Anyway, there could be more ways or option whereas government will not approve this if found out not worthy and since it did approve meaning the exchange has done something to prove to the government for the safety consumption for the community.

Yes, this is a great news. I actually really like Krakens' team and their vision of the future of the crypto market. They have built a great company, have clear business strategy, and Jesse Powell is doing a great job.

In a world where (some) banks still do nasty things when people send or receive money from crypto exchanges, this is great news. Kraken being a bank, the other banks will have no longer reasons for their crap.
Of course, this open a new world of opportunities for Kraken, good for them.

With all the KYC rules, the exchanges were already pretty close to banking, so it's quite a natural step forward and probably other exchanges will do the same.
Then we can have proper cypto cards, then they can become payment processors (cypto->fiat, but also fiat->crypto!) and many other.

Of course, all this works under KYC...

When i first heard the name Kraken, I imagined some shady exchange with its pirate-centric name. Later i came to know that it is quite an important one for the US. And now they are possibly tbe first crypto exchange to incorporate traditional banking. With its tentacles in both crypto-economy and in traditional banking, they are in a great position to market crypto offerings to normal customers.
Being a normal bank, i suppose they can now offer some sort of crypto-fund to their customers just like the bank salesmen sell other investment options. Kudos and congratulations to the Kraken team.

It'll be interesting to see whether they take that angle. I presume they did it to better serve their existing customers but its existence might open up plenty of options to drag in conventional customers. My guess is making the rest of the world know about them is probably going to be too expensive an uphill battle.

This is a big step, zooming out, agree, a big step on a long and twisty road that has to be walked down entirely. So yes, I guess it's only a timeframe difference.


I might disagree here: just remember trusting a third subject hodling your keys is now an option, not a necessity like now in the realm of FIAT shitcoins. So I welcome competition from the most different subjects to give the final user (be it a private or institutional investor) the best service.


This is a very welcome side effect, very good point. Funny thing is the banking regulator itself that allowed that!

Good mainstream news, could attract new comers into the space!

Not that we didn't see the approval coming. Kraken must have complied with all of the FATF, Travel Rule, KYC, AML, and all the other possible banking regulation these financial institutions can throw at to crypto exchanges.  

From time to time, I see people asking more options buying bitcoin using credit/debit cards other than Coinbase. This should be a welcome news to them as well. Hopefully, Kraken will offer cheaper fees or maybe even remove all charges for their customers.

Bear in mind that choosing an exchange is not only about the fees. They could provide cheaper fees, but just because they have a different business plan.
I prefer higher fees, but more respectful commitment toward your users.
More on this here:

Coinbase the most anti-Bitcoin organisation. Make #DeleteCoinbase great again (https://bitcointalk.org/index.php?topic=5253616)
A Treatise on Bitcoin and Privacy (https://bitcointalk.org/index.php?topic=5271127)

I think Kraken will continue to fare well on this regard.

It really makes zero sense to be a bank in the crypto world, what are they going to do get money and pay savings but also give loans and make people pay it?

Let's say there is 100 dollars in the world, and person A has it all, Person A pays the Kraken bank 100 dollars in return of 5% savings, meaning he will get 105 back , but there is no extra 5 dollars to be made there? The only money in the world is 100 dollars, how could Kraken pay that person 105 back? Where will they find that extra 5? Same time Kraken will loan to someone and ask them to give 110 back, which that person agrees but there is no extra 10 dollars, how could he make it?

As you can see that is the base of financial world, working with money that doesn't exist and crash when that debt reaches a high enough point and get bailed out by printing money so the money that doesn't exist they promised would be printed out of existence to save them.

The answer is in the OP:


Now this begs the question: how the heck is Kraken supposed to make any money with a 100% reserve requirement? That means they can't loan any dollars out in a traditional fractional reserve savings-and-loan model.

In order to legally loan money, they would need to have surplus (>100%) reserves.

At first I don't really see what they are trying to make out of crypto, coz crypto suppose to be eliminating banks from third partying, and here they are getting crypto banks. But then the reason is simple and great, they want to offer people digital assets in partner with banks so people could trust it, by that crypto industry will be bigger.


We all know that money is a lie lol but we can't believe to ourselves that we can live without it.  ;D

Collecting personal information is one of the requirements of AML so it will happen and they have to be more regularized under the control of the central bank, it may kill the purpose of cryptocurrency but at least we have more choices in the market.

The fees are also my main concern following the crazy gas fee on ETH platform, I’m looking forward for a great exchange to offer reasonable fees despite of the market trend. The Kraken approved as a bank, then there will be a good impact of this in the market.

Coinbase has real competitor now. I do agree that I have read here in the forum that some users are asking for alternatives of Coinbase.
There you have it. A really good development to cater the crypto community.
Let's hope that their fees are competitive so they can attract more users on their platform.

That’s not how money works and it’s why deflationary currency doesn’t work in the long run. Money is a representation of goods and services available for purchase in the economy. Money needs to scale to incorporate the change in economic activity in the economy. When you borrow capital to start a new business and make something that didn’t previously exist in the world, you’ve expanded the aggregate wealth of the economy. The money supply should expand to incorporate the new values you’ve added. That’s where the “new” money to pay back the loan comes from. With a deflationary currency, when the goods/services expand but the money supply doesn’t, that makes the unit of currency worth more since total aggregate wealth increased but the money supply stayed the same. That is, purchasing power of the currency has gone up. But this acts as friction against economic growth, because why spend now if the money will be worth more later. This causes a drop in economic activity and aggregate wealth to go down in the economy. It’s why a small amount of inflation is preferable to deflation, because it maximizes employment in the economy which is the best provider of societal stability.

I was asking myself the same and found an interesting article about full-reserve banking here (https://www.aier.org/article/competitive-full-reserve-banking/):

It seems like full-reserve banks indeed wouldn't be able to provide loans or overdrafts but would focus mainly on peer-to-peer payments, debit-card payments or wireing funds. They would invest all funds in zero maturity instruments, like loans, issued by the central banks. This way they are able to liquidate them at any point. And to generate revenue by providing only payments a full-reserve bank either has to introduce fees - which would drive customers away to other banks - or they need to get interest on their zero maturity instruments. And some central banks have started to pay interest on deposits. Not sure what of all this applies to Kraken though.

Interest on central bank deposits.....that's an interesting thought I hadn't considered. It doesn't mean much in the current environment with the interest rate on excess reserves (IOER) at only 0.10%, but under "normal" circumstances it would be closer to 1.5-2% annual. That's worth considering. According to Powell, Fed interest rates will probably stay near the floor for the next year or two. With that in mind, I assume Fed deposit interest is not a vital part of their model.


Good point. I always thought, given the pitiful nature of banking at most spot exchanges, that a sufficiently large one should just buy a US chartered bank to cut out the middlemen. That's basically what Kraken has done here.

Do we really know what Kraken intends to use this for? I mean obviously they got a bank charter approval which means they are going to be a bank.

I wasn't expecting them to get a bank approval and start a bakery neither, but I just want to know what type of bank will they become? Like if they can open a regular bank, non-crypto old-timer version, if they have that right would they work with fiat as well? Will they become a place that people could put fiat money and take out fiat money?

Or are they going to be purely crypto and not deal with anything else at all? I am just not sure about what will happen to them and how that will happen. If we can make sure that they are purely crypto and do not involve any fiat at all, that would be really an amazing thing.

Kraken becoming a private bank is also an opportunity for people to know more about cryptocurrencies. In the future, other banks may be also engaged in crypto trading as they did with the Forex market.
In the future, there may be more banks like Kraken, which is the best legal and best bridge between cryptocurrency trading and FIAT.

Full reserve banking requires banks to keep 100% reserves for in-demand accounts, such as a checking or savings account.  These are generally accounts that could be withdrawn at any time ("on demand") and the bank would have to comply.  The 100% reserve generally does not apply to time deposits, such as CDs and other types of accounts where there are withdrawal restrictions, so this is one avenue where a bank could make loans under a full reserve banking system. 

Also, Wyoming law seems to specify 100% reserve for fiat currency.  Perhaps crypto is a loophole.

However, lines of credit do not appear to be what Kraken is interested in at all.  The real reason Kraken wants to do this is to serve as a bridge between the traditional banking system and cryptocurrency.

Sorry, I am slow at this thing of 100% reserves.

This is perfectly clear for FIAT, but this means that Kraken will not be able to lend fiat or Crypto, is that correct?

If I deposit 100 USD, 100% reserve means that the liquidity will sit on bank’s account (actually at the Fed, maybe).
The bank won’t be able to lend my 100 USD in any way. That money will be used only to process payments (crypto exchange included).

But if I deposit 100 BTC on Kraken, there won’t be any fiat reserve backing those. The law requirement only means that the bank will have to keep my funds sitting on their wallet. Without lending (what are they supposed to do?Put those on uniswap?).

So there won’t be, as per my understanding, any “tether like” inquiry asking Kraken Banks to show fiat reserves backing their BTC holdings.

This is an obvious thing, but it get me a while to realise. Maybe I am getting old.

Ostensibly, this is correct. If you deposit 100 USD in a checking account, the 100% reserve requirement means the bank could not loan that money out. If it was in a time-deposit account, like a CD, it is possible that the bank would be able to loan that money out. However, Kraken isn't operating a bank with the purpose of making loans, so the 100% reserve requirements aren't a problem for them.

As for bitcoin deposits, it's unclear under the law if they would be allowed to loan that out since the law refers specifically to fiat. But my guess is it's a moot point because Kraken won't loan it even if they're allowed to because they don't want to be in the loan business. They want to operate a bank as a means to increase bridges between the crypto world and traditional banking.