Cryptocurrency exchange Kraken recently obtained a banking licence from the state of Wyoming, changing the face of the future of banking.
After three years of legal wrangling, Kraken Financial has been given a Special Purpose Depository Institution (SPDI) charter and will now be able to operate as a bank in the whole of the United States.
The regulatory framework provides for a special purpose national bank charter that can serve companies with AML / KYC challenges as well as the ability to be a qualified custodian of digital assets.
How Kraken and Wyoming are changing the face of banking
Located in Cheyenne, Wyoming, Kraken Financial will become the first ever Special Purpose Depository Institution (SPDI) bank.
The Kraken Financial infrastructure will seamlessly facilitate digital asset integration with the existing financial system, in what many believe will be the future of banking.
This new type of bank will allow Kraken to offer the same services as any other bank in the United States, such as deposits, and operate payment systems.
However, it will also offer its customers digital asset-backed credit and debit cards, staking, and deposits and withdrawals in cryptocurrencies such as Bitcoin.
This of course is cryptocurrencies like Bitcoin, today, but with the emergence of tokenized securities, it’s expected Kraken will be able to offer a crypto-style brokerage service in the future.
Kraken Financial – The Future of Banking
Unlike traditional banks and under the SPDI regulatory Kraken Financial is subject to a constraint that limits the misuse of its reserves.
Banks, as we know today, can simply create money out of fresh air to lend to their customers, but Kraken will not be able to do so.
Kraken Financial, however, will be required to keep 100% of its reserves so will not be able to earn income from its customer deposits.
However, because rehypothecated lending is what has gotten banks into so much trouble, this should completely eradicate insolvency risks for Kraken.
Speaking on the Pomp podcast, Kraken Financial CEO, David Kinitsky said the bank would be able to make profits elsewhere rather than rehypothecated loans.
‘Kraken has many options to ensure the sustainability of its business as a banking institution, said Kinitsky. ‘Assets denominated in US dollars, such as treasury bills or other types of highly rated assets, can generate income.’
And although the CEO recognizes that in the current environment of low interest rates, returns may be limited, Kraken is still confident it can generate a good return and a positive experiecne for its customers.
Wyoming Leading The Way for The Future of The Financial Industry
While tother states are regressing, Wyoming has emerged as a leader in paving the way for merging the crypto space with the legacy financial world.
Led by the likes of Caitlin Long, and State Representative Tyler Lindholm, Wyoming has become a crypto haven for any emerging crypto asset firm.
The Cowboy State has recently introduced new laws to define digital assets in three types of intangible property and is the first state to provide a legal definition for a consumptive or utility token.
The state has created policies and procedures that make it easy for institutional investors to invest in crypto, and offers a FinTech-style sandbox, with the aim of helping companies looking to innovate in blockchain.
It’s all a few years in the making and has ensured Wyoming will be the early pacesetter as Bitcoin, blockchain and digital assets begin to envelope traditional industries in the United States.
Kraken And Wyoming Leading The Way
Bitcoin and other cryptocurrencies have been looked upon with a sceptical eye from the likes of Wall Street, but the fact is incumbents rarely flourish when disruptive technologies emerge.
Wyoming has been working endlessly to encourage crypto-related companies to base themselves there, and Kraken’s new banking charter is only the beginning.
Kraken Financial will offer everything and much more than traditional banks offer, and in doing so will make it easy for crypto companies to operate.
The dollar will long be the reserve currency in the United States, but banking is about to take a giant leap into the future.
And with the pace at which Wyoming is moving, it’s likely we will see many more crypto-related companies integrating into traditional systems.
Author: Tommy Limpitlaw
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