San Francisco-based cryptocurrency exchange Kraken – arguably one of the largest and most prominent cryptocurrency trading platforms in the western hemisphere – has announced it’s been given the green light to establish its own bank.
Kraken Is Opening Its Own Bank
This is a unique step forward in the sense that banks and crypto are often complete opposites. Typically, banks are centralized financial institutions that have power over not only who they service, but what services those customers can gain access to. They decide who can break past the financial barriers and who must seek assistance elsewhere. Typically, they garner access to one’s financial background and take elements of this background – such as employment and payment histories – into consideration.
However, bitcoin and crypto are quite different in the sense that they often do not care what one’s background is. They do not deny service to anyone, and there’s no issues regarding who a person is, where they are or what they do for a living. If they have the capacity to open an online wallet, that’s all that’s necessary. They can begin trading from there.
The idea that a crypto exchange will now have control over a bank does more to bridge the gap between both centralized and decentralized finance. Kraken announced in a statement just days ago that Wyoming has approved the company’s application to start the world’s first Special Purpose Depository Institution or SPDI. According to figures at Kraken, the bank will largely be managed the same way a typical bank is managed.
This creates something of a conundrum in the sense that a crypto exchange – which is largely based on decentralized finance – will enable an institution that has more control over how people’s monetary lives run. Crypto is supposed to give all people a chance and enable financial independence, but the creation of a centralized banking institution tends to move away from that goal.
The new firm – which will be called Kraken Financial – will be stationed in Wyoming’s capital of Cheyenne. The Wyoming division of banking explained:
It is likely that many SPDI’s will focus heavily on digital assets, such as virtual currencies, digital currencies and utility tokens. SPDIs may focus on traditional assets as well.
Keeping Things Separate
Kraken was quick to mention that it will focus primarily on crypto and that traditional finance will be put on the backburner, though customers can still typically garner access to fiat and standard assets. The company mentioned:
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 US to bank seamlessly between digital assets and national currencies.
Under Wyoming law, however, Kraken Financial will be required to maintain custody of any fiat currencies held by customers the way a standard bank would.