Kraken Wins Bank Charter Approval

[fillippone]

Kraken becomes a "bank" in the US:

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.

The main point is the following:

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

This means that

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 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, and exchanges are getting closer to banks, like Kraken here.
It's a good news for institutional investors, but also for private ones.

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[Upgrade00]

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

[gentlemand]

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.

[OROBTC]

...

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.

[exstasie]

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.

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.

[erikoy]

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.

[Max2140]

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.

[NeuroticFish]

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...

[amishmanish]

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.

[gentlemand]

With its tentacles in both crypto-economy and in traditional banking, they are in a great position to market crypto offerings to normal customers.

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.

[fillippone]

I see it more as small news in a very, very long term transformation of the banking industry.

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.

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

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.

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.

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

[greensheep]

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

[Bttzed03]

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.

[fillippone]

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
A Treatise on Bitcoin and Privacy

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

[SquallLeonhart]

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.

[exstasie]

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?

The answer is in the OP:

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.

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.

[Twentyonepaylots]

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?

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.

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.

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

[samcrypto]

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.

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.

[TimeTeller]

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.

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.

[jaysabi]

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?

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.