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.
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 These are generally accounts that could be withdrawn at any time ("on demand") and the bank would have to comply.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.
The unique charter made for Kraken’s SPDI model is more similar to a custody bank than a community one, meaning that its primary focus will lie in asset custody and things like regulated securities and commodities, rather than safeguarding customer deposits and giving out lines of credit. Still, it hopes to operate in an accessible manner for a wide array of customers, and mentioned that it maintains a 100 percent reserve of all deposits in fiat currency.