Why wait when you can start your own bank?
U.S. exchange Kraken is reportedly set to establish its own bank.
In the latest episode of The Scoop, a podcast series backed by The Block, Kraken’s Chief Legal Officer Marco Santori revealed that the exchange would launch its own bank “very soon.” The new business is likely underway, regardless of current regulatory pushback.
“We’re going to have those pens with the little ball chains. We’re going to order thousands of them and attach them to the to the desks of Wall Street banks everywhere. With our logo.” the executive said with enthusiasm.
The U.S. Isn’t Looking Crypto Friendly At The Moment
However, Kraken’s move to take things to the next level might face a long list of problems including pressure from the U.S. authorities.
Last month, Kraken had to shut down the U.S. staking services and settle with the Securities and Exchange Commission (SEC) for $30 million. SEC Chairman Gary Gensler also put the settlement on notice to warn other crypto firms.
In the face of regulatory challenges, Santori asserted that staking only accounted for a small part of the exchange’s revenue.
The executive didn’t voice opposition to the SEC’s allegations but said that the regulatory actions would direct the U.S. customers to foreign staking services, which could potentially pose threats to both customers and U.S.-based companies.
Bloomberg previously reported that Binance CEO Changpeng Zhao considered buying or investing in banks to bridge the gap between traditional finance and crypto.
No official updates have since been given, instead, Binance recently introduced an AI-powered NFT generator called “Bicasso,” a tool that allows users to make their own NFTs.
Do Banks And Crypto Make A Perfect Duo?
There was a time when global banks launching crypto-related services made headlines, fueling the hopes of mass crypto adoption. Now not only banks but also payment giants such as Visa or Mastercard are holding them in check, citing the lack of certainty.
The recent investigations target to root out illegal activities in the vibrant, unregulated nascent market. U.S. officials are concerned that cryptocurrencies are being used to conceal illegal transactions, including theft, money laundering, and drug trafficking.
Banks are keeping a distance from cryptocurrency. Bybit announced last week that it stopped supporting USD payments because its bank partner stopped providing this service.
Binance said last month that it would end USD deposits and withdrawals. The exchange explained that its banking partner in the U.S., Signature Bank, wanted to change the agreement conditions of cooperation and reduce their crypto exposure, thereby only supporting transactions of at least $100,000.
This scenario, according to Santori, is of no use for innovations. He said that Coinbase and Kraken could handle the situation but “the guy or gal who has a new idea about how to provide infrastructure to the crypto economy” could hit roadblocks.
On the other hand, the crypto firms that offer bank-like services have brought turmoil to the industry. Not too long ago, the market experienced major setbacks following the collapses of Celsius, Voyager Digital, FTX, and BlockFi. Those events have destroyed both community and regulatory credibility.
Kraken’s announcement came at a time when Silvergate was in a state of crisis. The crypto-friendly bank that handles fiat deposits for major crypto platforms had to end its remittance network due to severe financial struggles.
Signature Bank, an alternative to Silvergate, had to reduce crypto exposure by $8 billion to $10 billion, partly because of the impact of the FTX crash.
Santori said Kraken’s banking relationships are secure and that the exchange has multiple global banking partners. The question is whether Kraken could obtain regulatory approval to establish its own bank, which sounds mission impossible.