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Kraken becomes first crypto bank

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Kraken's journey to being the USA's first crypto bank is emblematic of crypto's long road to mainstream acceptance.

Earlier this week the Wyoming Banking Board voted to approve the Kraken cryptocurrency exchange's application for a special purpose depository institution (SPDI) charter.

In other words, it became a real bank.

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By becoming a bank, Kraken gets direct access to federal payments infrastructure and it can start offering more funding options for its customers. It also gives Kraken an easier way to navigate the patchwork tapestry of state-by-state regulations that characterises the USA's crypto-regulatory scene.

Plus, the particulars of Kraken's license require it to be fully collateralised at a time when memories of bank failures a decade ago are probably coming to the surface again.

"We would expect to offer a host of new products as we get established," said newly appointed Kraken Financial CEO David Kinitsky. "Those will range from things like qualified custody for institutions, digital-asset debit cards and savings accounts all the way to new types of asset classes. We can engage with securities and commodities and things like that as a bank. So a lot more TBD there."

It's difficult to overstate what a potentially big deal this is, given how much new ground Kraken had to cover to get this far, and how many of the crypto-banking laws and guidelines that now define this new space were created specifically because Kraken was blazing a trail here, with assistance from Wyoming officials.

In July this year the US Office of the Comptroller of the Currency gave US banks the greenlight to hold crypto, and next month the Division of Banking plans to publish the first manual for bank regulations and procedures when handling digital assets.

Entertainingly, Kraken's early history was full of frictions with regulators, especially in New York, and Kraken CEO Jesse Powell hasn't exactly been a big advocate for the banking system in the past. As he said, a banking license definitely wasn't part of the plan when Kraken started.

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Disclosure: The author holds cryptocurrencies including LINK at the time of writing

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