Kraken has secured a “master account” from the Federal Reserve, giving its banking arm direct access to the Fed’s central payment systems and making it the first crypto firm to operate on a par with traditional financial institutions.
The company said its unit, Kraken Financial, received approval for a Federal Reserve “master account,” the Wall Street Journal first reported. The account provides direct access to Fedwire, a large interbank payment network that processes trillions of dollars in transfers every day.
Until now, Kraken has relied on partner banks to send or receive US dollars. Direct access changes that flow as the company can now process payments itself, which can speed up payments for large merchants and institutional customers.
“This approval is a watershed moment for the digital asset industry,” U.S. Senator Cynthia Lummis said in a press release.
“The Federal Reserve has recognized what I have always said was the case – that a digital asset company can balance innovation with strong risk management,” she added. “[This] is going to create the 21st century financial services industry.”
Kraken Financial operates under a Wyoming charter designed for crypto-focused banks. The Federal Reserve Bank of Kansas City supervised the application.
“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 support for Wyoming’s banking and digital asset laws.”
However, the approval is limited. Kraken will not receive the full set of services available to traditional banks, as it will not earn interest on reserves or tap into the Fed’s emergency lending.
Kraken, a cryptocurrency exchange founded in 2011, has been slowly moving towards an initial public offering (IPO). Several of its rivals, including Gemini, Coinbase and CoinDesk’s parent company Bullish, have already made their public market debuts.
Its parent company, Payward, has been on an acquisition spree, adding token management platform Magna last month. Last year it bought US 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 equity specialist Backed Finance, the issuer of xStocks.
UPDATE (March 4, 15:55 UTC): Adding comments from Cynthia Lummis’ press release.
