We had written an article about Kraken’s intention to become a bank, it’s done and of course Cryptocurrencies is here to cover it. The octopus now walks on bank flower beds and could cause them trouble, even if its tentacles are not free of movement for the moment.
Wyoming unleashes the Kraken in banking
Kraken recently obtained a license allowing it to operate as a bank in the United States.
TheState of Wyoming approved the exchange’s request to become the first Special Purpose Depository Institution (SPDI).
Kraken Financial will be licensed to provide depository, custody and trust services for digital assets.
In the podcast Unchained of Laura Shin, the financial director of Kraken, David Kinitsky, explains that direct access to the federal payments system would effectively integrate withdrawal, payment, and funding mechanisms into the exchange architecture.
Kraken should develop a new product line :
- Digital asset-backed credit cards like Bitcoin (BTC)
- Investment products
- And many more to discover
Customers should therefore benefit from a considerable improvement in quality of service.
Kinitsky mentions that institutional investors will also benefit from these new advantages.
Kraken Financial: shackled tentacles
Unlike traditional commercial banks, Kraken Financial is subject to a constraint that limits the misuse of its reserves.
The exchange is indeed required to keep 100% of its reserves and, therefore, will be unable to lend depositors’ funds to earn income.
According to Kinitsky, Kraken has many options to ensure the sustainability of its business as a banking institution: Assets denominated in US dollars, such as treasury bills or other types of highly rated assets, can generate income.
Kinitsy recognizes that in the current environment, returns may be limited given the low interest rates.
Kraken may also obtain interest on the assets deposited and kept by them.
Cryptoassets are highly volatile unregulated investment products. No EU investor protection. Your capital is at risk.
Are exchanges doomed to become banks? Is this the best strategy to increase the adoption rate of cryptocurrencies? We are waiting to see if Binance or OKEx will follow this path. This could force banks to season their current services with a crypto sauce to prevent them from becoming obsolete. Is Kraken the source of a first rift in the wall separating traditional banks and crypto-exchanges?
Litecoin, welcome in the Silver Age