Kraken to Move from Exchange to Crypto Bank amid US Regulatory Dispute

Kraken, one of the major cryptocurrency exchanges, confirmed its plans to launch a crypto banking suite in the foreseeable future. The move was first announced in 2020, and the idea is now reappearing amid recent regulatory issues in the United States, where the Securities and Exchange Commission (SEC) banned Kraken's staking service.

Kraken Crypto Bank Will Answer Regulatory Hurdles?

Although Kraken did not confirm the launch of its cryptocurrency bank in any official statement, information appeared in comments on the exchange's Twitter feed and in one of the recent podcasts with the company's representative.

Kraken's support team informed a Twitter user that Kraken Bank is still in progress and will at first be offered to customers in the United States. According to earlier information from 2020, the new bank will be headquartered in Wyoming and operate as a special purpose depository institution (SPDI).

"Kraken Bank is not open yet but on its way! The offering will initially be available to existing Kraken clients in the USA with potential international expansion in the future," Kraken commented on Twitter.

Hey Wayne,Kraken Bank is not open yet but on its way! The offering will initially be available to existing Kraken clients in the USA with potential international expansion in the future.You can subscribe to Kraken Bank updates here 👉https://t.co/m3yPoGpu2gKraken Support 🐙

The information was confirmed by Marco Santori, the Chief Legal Officer at the crypto exchange, during Frank Chaparro's The Scoop podcast. Santori revealed that Kraken Bank is on track to "launch very soon."

"From paying bills and receiving salaries in cryptocurrency to incorporating digital assets into investment and trading portfolios, Kraken Financial will enable Kraken clients in the US to bank seamlessly between digital assets and national currencies," Kraken stated back in 2020 when initially revealing its plans to open a crypto banking institution.

According to experts, the move by Kraken is a response to the exchange's regulatory problems that arose in the US over its cryptocurrency staking offer.

Kraken Settles with SEC and Pays $30 Million

In early February, Bloomberg reported that Kraken faced an SEC investigation for offering unregistered securities. Although either party did not officially confirm the information, the SEC issued a release a day later saying that Kraken had decided to settle in relation to its cryptocurrency staking offering in the US. As part of it, the company paid $30 million and ceased further service provision.

Holders can receive additional rewards by staking their cryptocurrencies with a blockchain validator. However, they must give up control over their original holdings until the staking period is over. As a result, holders of staked tokens are rewarded with newly mined cryptocurrencies.

According to the SEC, Kraken launched staking-as-a-service in 2019 and advertised up to 21% annual investment returns. However, Kraken's website indicates that the returns are only up to 20 percent.

Kraken was not the SEC's only target in February. The regulator also took an interest in the activities of Paxos, a company that issues the BUSD stablecoin, which is one of the core assets of the Binance platform. Meanwhile, in a later interview, the platform's CSO confirmed that several compliance gaps had arisen in the company's past and that Binance expects to pay penalties to resolve investigations in the US.