The cryptocurrency exchange Kraken last week obtained a special-purpose depository institution license from Wyoming to become the first licensed bank to provide deposit-taking, custody and fiduciary services for digital assets.
The move marks a new chapter in the exchange's search for an agreeable license. Kraken pulled out of New York in 2015, after executives saw the state's BitLicense as too invasive.
With the new setup, Kraken will maintain its headquarters in San Francisco, but a subsidiary, Kraken Financial, will be based in Cheyenne and act as a bridge between digital assets and fiat currency. The license will help Kraken reduce its dependence on third-party financial institutions.
By being on the cutting edge of government regulatory participation in crytpo-blockchain finance, Wyoming can perhaps position itself as a top jurisdiction for fast-growing crypto players. Kraken is not alone among crypto firms in seeking to gain regulatory approvals they can tout to consumers.
"Wyoming is a rare and shining example of how thoughtful regulation can drive innovation for fintech companies," said David Kinitsky, Kraken Financial's CEO.
Deposits won't be insured by the Federal Deposit Insurance Corp. (FDIC), so Kraken will be required to maintain 100% reserves against all deposits. However, the FDIC typically only insures deposits up to $250,000. If Kraken were to deal only with big depositors, the point of an FDIC backstop would be moot.
For now, Kraken will only offer accounts to U.S. residents, but the exchange plans to expand to a global clientele. The company said it would offer digital asset custody, demand/deposit accounts, and wire transfer and funding services in its first year but plans a suite of mobile and online banking products, a debit card and other functions.
A bit of a serial acquirer, Kraken has bought 10 companies so far. The excahnge has had one funding round, a crowdfunding offering that has raised $118.5 million, according to Crunchbase. Founder Jesse Powell was quite public in late 2018 about floating more equity that he said would value the company at $4 billion, but so far that financing, much less the valuation, has not been announced.