Kraken Persists With Plans to Launch Its Bank Despite Facing Regulatory Obstacles
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Kraken crypto exchange is still working on launching its bank, despite the challenging regulatory environment and the recent shutdown of its on-chain staking services for U.S customers
The Securities and Exchange Commission (SEC) had accused Kraken of violating securities laws. Nonetheless, Kraken remains steadfast in its commitment to its plans.
Kraken’s chief legal officer, Marco Santori, confirmed on The Scoop podcast with Frank Chaparro that the company is on track to launch its own bank. He also shared that Kraken plans to order thousands of pens with little ball chains and their logo to distribute to Wall Street banks. Despite obstacles, Kraken continues to move forward with its plans to establish its financial institution.
#Kraken continues its plan to launch its own bank despite a difficult regulatory environment.
"Kraken Bank is on track to launch very soon," said Marco Santori, Kraken's Chief Legal Officer.
🗞https://t.co/nchg5wUfvD pic.twitter.com/6Km1B8dZf7— John Adk (@adeokoun_john) March 6, 2023
The launch of this new bank comes at a time when the cryptocurrency industry is facing turmoil. This comes amid the aftermath of FTX’s collapse, which has led to several enforcement actions and growing uncertainty regarding regulations in the past few weeks. SEC Chair Gary Gensler warned everyone in the marketplace that the $30 million fine as part of the Kraken settlement should serve as a warning.
Santori was asked about the SEC settlement but did not discuss the details. However, he confirmed that staking only comprised a small part of Kraken’s income. He also stated that Kraken did not admit or deny any of the allegations made in the complaint.
Banking Relationships and Regulatory Perspectives on Cryptocurrencies
Kraken has secure banking relationships with a diverse set of banks worldwide. However, the increased caution among banks could hinder innovation in the crypto sector. Santori believes that we are entering a period where banks will be extremely cautious about opening accounts, making it difficult for new ideas to provide infrastructure for the crypto economy.
Furthermore, established companies like Wall Street are not affected by this issue as they have already established relationships with banks. Santori clarified that there is no secret group in Washington, D.C., that is dedicated to opposing cryptocurrencies. However, he acknowledged that a group of regulators shares a similar perspective towards crypto. He stated that they believe the current state of cryptocurrencies is significant, but their potential future developments hold less importance.
Silvergate Bank Struggling for Options
In a parallel setting, Silvergate Capital is losing customers, time, and money, leaving the struggling U.S. crypto industry with few banking partners. The bank warned in a regulatory filing that it might not have enough capital and is reconsidering its business. This is causing industry giants like Coinbase, Circle, Paxos, and Gemini to publicly sever ties with the bank.
Market-making and over-the-counter trading firms GSR, Wintermute, and Blockchain.com have also reportedly left the Silvergate Exchange Network (SEN). GSR allows clients to send U.S. dollars and euros 24 hours a day. SEN had driven significant growth for the bank, handling over $560 billion in volume last year. This has caused Silvergate’s shares to drop by about 50%.
There are few banking partners left in the crypto industry after Coinbase Prime users moved to Signature Bank. However, Signature Bank plans to reduce its involvement in the crypto space. Cross River Bank in the U.S. and offshore options like Deltec are possible alternatives. Vice president of business development and strategy at LedgerPrime, Laura Vidiella, thinks that the industry will adapt to the new circumstances in the mid-to-long term, despite the short-term shock. Other institutions may step up, but Silvergate’s current predicament and the regulatory environment make this unlikely.
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