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First Crypto Bank Emerges as Kraken Gets Wyoming Bank Charter

First Crypto Bank Emerges as Kraken Gets Wyoming Bank Charter

Bitcoin and cryptocurrency exchange Kraken has secured a special-purpose depository institution license from Wyoming. Kraken Financial is a wholly owned subsidiary of Kraken headquartered in Cheyenne and it will be the first regulated U.S. bank to provide deposit-taking, custody and fiduciary services for digital assets. Caitlin Long, a former Wall Street banker, is also forming a special-purpose bank in Wyoming called Avanti Financial Group that will provide custody and other crypto banking services.

Both companies are taking advantage of a set of blockchain laws Wyoming passed late last year, one of which created the special-purpose banking charter.

“I’m proud that Wyoming is leading the way in digital assets and built the framework for this historic announcement to occur,” Gov. Mark Gordon of Wyoming said when Kraken’s charter was approved Wednesday morning by the Wyoming State Banking Board. “This puts into practice what Wyoming saw as an opportunity to meet the challenges of a digital economy and allow businesses a way to hold digital assets safely.”

Kraken closed its operations in New York in August 2015 when the state rolled out a set of regulations for digital asset companies called a BitLicense (it continued business from its San Francisco headquarters). At a Consensus event in 2018, Powell said the BitLicense was regulatory overreach and that it would have required Kraken to “disclose all the information about our entire global client base to the state of New York,” which he said was a potential data privacy violation.

Now Kraken, which says it has about 4 million clients globally, will make a fresh start in a welcoming state. David Kinitsky, its CEO, explained to American Banker why the company pursued this charter and what it hopes to do with it. Kinitsky is a former attorney who joined Kraken about six months ago after spending the past 15 years in financial services that included stints at Fidelity Investments and Circle.

Who will the customers be, institutional investors or consumers?

Both. There will be institutional clients of qualified custody. We also will be serving U.S.-based individuals that are current Kraken customers, we will safekeep or custody their digital assets.

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