Cryptocurrency exchange Kraken has been awarded a US Banking Charter, handing it a licence create America’s first crypto bank.
Kraken announced earlier that the state of Wyoming approved Kraken’s application to form Kraken Financial, which can form a ‘Special Purpose Depository Institution’ (SPDI) bank.
The charter will allow Kraken to offer a seamless transition between crypto and fiat system, and the San Francisco-based crypto company will custody digital assets and fiat currencies for its customers.
The bank is limited to certain states, but will offer its clients the capability of receiving salaries in cryptocurrency, as well as hold cryptocurrency with the bank.
Kraken Financial’s CEO, David Kinitsky said the company ‘expects to launch either later this year, but most likely at the beginning of 2021.’
The SPDI banking charter means Kraken Financial will become a “custody bank”, and will have to maintain all of its customers’ reserves at all times.
This means Kraken Financial will not be allowed to fractionally reserve (print out of thin air) customer assets like other banks, and it won’t be allowed to issue loans from its customers deposits, but it will be able to issue loans from its own cryptocurrency holdings.
‘Right now, we are prohibited from lending on the US dollar side,’ said Kinitsky. ‘There are some provisions in the statute that enable us to facilitate customer-directed lending of digital assets. And so we would anticipate conducting that type of lending activity.’