Kraken has secured a “master account” from the Federal Reserve, giving its banking arm direct access to the Federal Reserve’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, 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 trillions of dollars in transfers each day.
Until now, Kraken had to rely on partner banks to send or receive US dollars. The direct access changes come as 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 asset industry,” US Senator Cynthia Lummis said 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,” he added. “[This] will create the financial services industry of the 21st century.
Kraken Financial operates under a Wyoming statute designed for cryptocurrency-focused banks. The Federal Reserve Bank of Kansas City oversaw the request.
“This news has been a long time coming, but Wyoming welcomes it,” said Wyoming Governor Mark Gordon. “This approval of a master account for Kraken by the Federal Reserve indicates support for Wyoming’s banking and digital asset laws.”
However, approval is limited. Kraken will not receive the full suite of services available to traditional banks, as it will not earn interest on reserves or take advantage of emergency loans from the Federal Reserve.
Kraken, a cryptocurrency exchange founded in 2011, has been slowly moving toward an initial public offering (IPO). Several of its rivals, including Gemini, Coinbase and Bullish, CoinDesk’s parent company, have already made their public market debut.
Its parent company, Payward, has been on an acquisition spree and added token management platform Magna last month. Last year, it acquired US futures trading platform NinjaTrader for $1.5 billion and US-licensed derivatives trading venue Small Exchange for $100 million.
It also entered the tokenization space with the acquisition of tokenized equity specialist Backed Finance, the issuer of xStocks.
UPDATE (March 4, 3:55 pm UTC): Adds comments from Cynthia Lummis’ press release.
