Get Ready For The Kraken Bank…

Updated: 07 March 2023

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Various banking institutions are increasingly turning their backs on crypto-related activities. However, that is not the case with the San Francisco-based crypto exchange, Kraken. Despite the ongoing regulatory challenges the crypto industry faces, Kraken has decided to launch its bank in the United States very soon. During an appearance on the Scoop Podcast, Kraken’s Chief Legal officer, Marco Santori, told the Block’s Frank Chaparro that:

Kraken Bank is very much on track to launch very soon. We are going to have those pens with the little ball chains. We will order thousands of them and attach them to the desks of Wall Street banks everywhere. With our logo.

EXCLUSIVE: Kraken is on track to launch bank 'very soon' despite regulatory 'weird place' https://t.co/MmYqfHJJBu

— The Block (@TheBlock__) March 6, 2023

Kraken has recently been a target of the Securities and Exchange Commission (SEC). The agency has increasingly cracked down on the crypto ecosystem following the fallout of the giant exchange FTX in November. However, the SEC charged Kraken with selling unregistered securities and for its staking-as-a-service platform to United States customers. Nonetheless, Kraken agreed to settle the charges by stopping its on-chain staking services for its users in the U.S.

Additionally, the platform paid a $30 million fine for prejudgment interest and civil penalties to serve as a lesson to other crypto platforms who might go against SEC’s rules.

The SEC chair, Gary Gensler, noted that the move against Kraken should “put everyone on notice in this marketplace.” Additionally, he pointed out that the SEC will enforce actions against crypto-related platforms that do not adhere to U.S. financial laws.

However, Santori asserted that the U.S.-based staking service represented only a tiny percentage of the exchange’s revenue while declining to discuss the SEC settlement in detail. He added that” it does affect our product mix in the United States dramatically.” Kraken’s chief legal officer also noted that the SEC would push American residents requiring offshore staking services to far riskier exchanges. Santori stipulated:

It is indicative of a pretty unfortunate situation here stateside. We have a regulatory environment forcing users to use offshore exchanges that will gladly accept their business with so little as a VPN.

Is Silvergate Bank’s fall the wake of Kraken Bank’s launch?

Silvergate Bank, which has previously been a significant banking partner for various top crypto platforms, has been undergoing struggles since the wake of the crypto turmoil of 2022. With the crypto-friendly Silvergate shutting down its mostly-used Silvergate Exchange Network (SEN), it has served to speed up Kraken’s plans to launch a bank. The crypto exchange Kraken does so in an effort to enable and maintain banking services and promote innovation within the crypto ecosystem.

Additionally, major crypto platforms have cut ties with Silvergate, including Paxos, Gemini, Galaxy Digital, and Circle.

Notably, Santori did give a warning on the rising caution on the banking front, noting:

We are turning to an era where banks will be very cautious about what accounts they open. Wall Street is going to be fine. Kraken and Coinbase are going to be okay.

Santori also gave remarks on “any individual who has a new idea about how to provide infrastructure to the crypto economy. It would be a tough road for them over the next few years. No question,” he added.

Early this month, Kraken reportedly revealed terminating some of its services with crypto-focused Signature Bank. This includes the ability for non-corporate customers to deposit or withdraw U.S. dollars with the bank. Notably, the deposits to Kraken using Signature will be phased out on March 15, while the withdrawals will end on March 31.

Santori’s take on the crypto sector

Notably, Santori was questioned on the idea of floating around the crypto sphere, where there is a concerted effort by the government to destroy the crypto space in the United States. However, he pushed back and noted that he didn’t think there was a biased crackdown on the crypto space in the U.S.

Kraken's Chief Legal Officer: Banks are shying away from taking on crypto customers https://t.co/Sb2BYB567H

— The Block (@TheBlock__) March 6, 2023

Nonetheless, he acknowledged that the events in 2022 have led to a consensus among regulators. In that, the crypto sector cannot operate unchecked as time passes. He said:

There is not some anti-crypto group that meets weekly in some dim room in D.C. But there are a group of regulators who happen to feel about the same way concerning crypto… I think they believe in one fundamental thing, that what crypto is today is important, and what it will be in the future is not important.

However, apart from Santori’s take on the crypto sector, it is worth noting that Kraken has secure banking relationships with various banks globally.