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Home Crypto

Crypto Exchange Krakan to launch its own Bank

by Om Chaturvedi
March 7, 2023
in Crypto
Reading Time: 2 mins read
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Crypto Exchange Krakan to launch its own Bank

Credits: Thailand Posts

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Amid the several downturns in the crypto market, including the Silvergate fallout and regulatory crackdown, the U.S.-based cryptocurrency exchange Kraken has unveiled its plans to launch a banking institution. This was revealed by Marco Santori, Kraken’s Chief Legal Officer, in a podcast with The Block. This update comes when the crypto industry is experiencing a downtrend due to negative news from Silvergate and several backlashes from regulators.

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Meanwhile, US lawmakers are working to reduce crypto exposure for traditional financial firms. Senator Elizabeth Warren told the US Treasury Department to use every tool to rein in the crypto market. The democrat senator from Massachusetts claims that evidence showed that crypto threatens “National Security, Climate, Financial Stability, and Consumer and Investor Protections.” The Federal Deposit Insurance Corporation (FDIC) recently advised banks on the liquidity risks associated with crypto.

Crypto Exchange Kraken Inching Closer To Open Its Own Bank
Credits: – TheNewsCrypto

The exchange’s plans for a bank comes as the crypto sector navigates the latest episode of a crypto-related downturn as crypto-friendly bank Silvergate wades through a difficult time. The US-based crypto bank has continued to witness financial gloom since the collapse of crypto exchange FTX. Kraken itself has also been under increased regulatory pressure, recently agreeing a multi-million dollar settlement with the US Securities and Exchange Commission (SEC) over the exchange’s staking services.

The SEC has also increased its regulatory actions against crypto companies, with stablecoin issuer Paxos one of those facing the agency’s charges. Crypto lender Nexo also recently agreed to a settlement with the SEC a few weeks after announcing a phased out exit from the US market.

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.

Kraken will "soon" launch its own bank
Credits: Coin Journal

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.

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%.

Tags: #CryptoBankKrakan
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Om Chaturvedi

Om is a final year Engineering student in Panjab University, Chandigarh. Content Writer by Choice. Special Interest in Crypto, Metaverse and AI. Three Years of Experience in writing and ambitious to bring change with Pen & thoughts.

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