Kraken has obtained a Federal Reserve “master account,” giving its banking arm direct access to the Fed’s major payment systems and making it the first crypto company to operate on the same rails as traditional financial institutions.
The company said its unit, Kraken Financial, had received approval for a “master account” from the Federal Reserve, the Wall Street Journal first reported. The account provides direct access to Fedwire, a major interbank payments network that processes billions of dollars in transfers every day.
Until now, Kraken had to rely on partner banks to send or receive US dollars. The direct access changes are happening because the company can now settle payments itself, which can speed up deposits and withdrawals for large merchants and institutional clients.
“This approval is a watershed moment for the digital assets industry,” said U.S. Senator Cynthia Lummis in a press release.
“The Federal Reserve has recognized what I have always said: that a digital asset company can balance innovation with strong risk management,” she added. “[This] will create the financial services industry of the 21st century. »
Kraken Financial operates under a Wyoming charter designed for crypto-focused banks. The Federal Reserve Bank of Kansas City oversaw the request.
“This news has been a long time coming, but Wyoming welcomes it nonetheless,” said Wyoming Governor Mark Gordon. “This approval of a master account for Kraken by the Federal Reserve signals its support for Wyoming’s banking and digital asset laws.”
Approval, however, is limited. Kraken will not benefit from the full range of services available to traditional banks, as it will not charge interest on reserves or tap emergency loans from the Fed.
Kraken, a cryptocurrency exchange founded in 2011, is slowly moving toward an initial public offering (IPO). Several of its competitors, including Gemini, Coinbase and Bullish, the parent company of CoinDesk, have already debuted on the public market.
Its parent company, Payward, has embarked on an acquisition spree, adding token management platform Magna last month. Last year, it acquired US-based futures trading platform NinjaTrader for $1.5 billion and US-licensed derivatives trading platform Small Exchange for $100 million.
It also moved into the tokenization space with the acquisition of tokenized stock specialist Backed Finance, the issuer of xStocks.
UPDATE (March 4, 3:55 p.m. UTC): Adds comments from Cynthia Lummis’ press release.
