Amid several downturns in the crypto market, including the Silvergate fallout and regulatory violations, US-based cryptocurrency exchange Kraken has announced 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 at a time when the crypto industry is experiencing a downtrend due to negative news from Silvergate and some backlash from regulators.
Kraken To Open A Bank
Marco on the Scoop Podcast says plans to launch an industry-focused bank are coming. The chief legal officer added:
Kraken Bank is very on track to start, very soon, We will have that pen with a little ball chain. We’ll order thousands and stick them on the desks of Wall Street banks everywhere. With our logo.
The future bank to be launched by Kraken has caused speculation among the public about whether a bank originating from the crypto sector can be trusted even after the crash of the largest crypto exchange FTX.
The collapse has affected confidence in the new sector. Mismanagement of customer funds by the founder and CEO, also known as Sam Bankman-Fried (SBF), led to the collapse of the exchange.
In addition, the Silvergate exchange network in the crypto industry has been compromised, as this financial institution questions its capacity to continue operating; Santori said that Kraken’s relationship with banks has exchanges speaking with “a group of banks around the world.”
Adding that increased banking caution around the crypto sector could hinder innovation in the ecosystem. “We’re going back to the days when banks were careful about what accounts they opened,” Santori said while adding:
Wall Street will be fine. Kraken and Coinbase will be okay. But for the man or woman who has a new idea of how to provide the infrastructure for the crypto economy, it will be a very difficult road for the next few years. There is no question.
Kraken New Saga With SEC
In particular, this news comes after Kraken’s conclusion with the Securities and Exchange Commission (SEC). Earlier this year, the SEC charged crypto exchanges with violating securities laws through staking services.
US regulators have charged crypto exchange Kraken’s subsidiaries, Payward Ventures Inc and Payward Trading Ltd, with failing to register for the crypto exchange’s staking-as-a-service program.
However, a few months later, Kraken agreed with the SEC to pay $30 million in disgorgement, prejudgment interest, and civil penalties to end its crypto asset staking program.
Regarding the staking program, which is now closed, Santori noted that staking is a small percentage of Kraken’s revenue. “This, of course, affects our product mix dramatically in the US,” Santori said.
Executives said that the achievement of the SEC in making exchanges shutdown staking programs will only push American customers who want offshore staking services to riskier exchanges. Santori concludes:
This really shows the unfortunate situation here. We have a regulatory environment that essentially forces users to use overseas exchanges that will accept little business like VPNs.
Meanwhile, the crypto market has not reacted significantly to Kraken’s announcement of an upcoming crypto bank. The global cryptocurrency market capitalization continues to decline, falling almost 1% in the last 24 hours, with a value of $1.073 trillion.
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