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Troubled waters: Kraken upstages traditional banks

Photo of: Joseph Stone
by Joseph Stone

Traditional banking institutions have, with all their might and extremely often, criticized cryptocurrencies. However, this will not have been enough to stifle them since, for the first time in the United States, a crypto exchange platform plans to become its very own bank: Kraken.

A publication on the blog of the crypto stock exchange Kraken tells us that its branch called Kraken Financial has just obtained the title of Special Purpose Depository Institution (SPDI) by the American State of Wyoming.

“Wyoming is a rare and shining example of how thoughtful regulation can drive innovation for FinTech companies. “David Kinitsky, CEO of Kraken Financial said earlier today.

This title, which could be translated as a depository institution with a specific vocation (here, digital assets), will enable the Kraken teams to establish a “bridge of trust” between the economy of the future and the crypto sphere and the current economic system.

The platform thus becomes the first regulated American bank to provide complete deposit and custody services for digital assets and traditional fiduciary currencies (dollar, euro, yen…).

Kraken Financial, a future international bank?

Based in Cheyenne, Wyoming, Kraken Financial will start working locally before expanding throughout the United States. Its final objective is announced cash: “Kraken Financial will soon operate on a global level”.

As an SPDI, Kraken Financial will even have a big advantage for its clients, compared to traditional banks. It will not practice fractional reserve of its fiduciary currencies.

Indeed, this global banking obligation imposes to hold 100% of the deposits in fiat currencies. Because of their fractional reserve, traditional banks only guarantee their clients’ deposits up to an average of $250,000 in the United States. In Europe, this insurance mechanism is 100,000 euros: beyond that, in the event of a bank failure, customers have no guarantee that their money will be returned.

During its first months of activity, Kraken Financial plans to allow its customers to :

  • Deposit USD on a deposit account
  • Keep digital assets with the same level of security as any bank;
  • Make bank transfers.
  • The staking of cryptocurrencies will be supported, as well as the provision of a bank card to spend their encrypted funds and other banking services for crypto-bank customers.

Why wait for the approval from traditional banks that will never come? Kraken has understood this and is laying today the foundation stone for tomorrow’s banks, which will combine state currencies and cryptocurrencies at the same level.