Located in Wyoming, the cryptocurrency exchange Kraken's bank—Kraken Financial—has made history with its approval for a "streamlined" (restricted) master account. Experts describe this outcome, which took 5.5 years to achieve, as a "historic turning point" for the crypto industry. In a special segment titled "DEX in the City," legal and crypto experts discussed the significance of Kraken gaining direct access to the FED system.
During the event, Vyle, the company’s General Counsel responsible for Kraken's DeFi News product vault, emphasized the importance of this development, stating: "The FED master account is like an 'installation' of the U.S. financial system. With this account, you can hold reserves directly with the FED and transact via FedWire without needing a correspondent bank. This is a revolutionary change that eliminates counterparty risk and enhances system efficiency."
Unlike fully authorized bank accounts, Kraken's verification status is "streamlined." Vyle summarized the limitations that come with this status. Participants noted that Kraken has been waiting for this approval since 2020 and discussed why the approval process took so long. Vyle pointed out the difference between Kraken and Custodia Bank, which had also submitted a similar application but was denied: "Custodia sued the FED after its application was rejected but lost. Kraken, on the other hand, took a more low-key approach. Additionally, Kraken's IPO preparations and its image as a larger representative may have led the FED to perceive the risk of their 'experiment' as lower."
This development has sparked strong opposition and reactions from the traditional banking sector. Program member Jessi Brooks explained the reasons for the banks' opposition: "Banks are angry because they fear that cryptocurrency companies will enter their business areas with faster, more efficient, and cheaper mechanisms. The Bank Policy Institute (BPI) believes these approval processes are improper and plans to file a lawsuit." Jesse also stated that while the banks' viewpoint that "crypto companies should not take shortcuts into regulated areas" has some merit, the 5.5-year review process proves that Kraken did not use any "shortcuts."
This approval further strengthens the ties between the cryptocurrency industry and traditional finance (TradFi), with experts noting that this endorsement from the FED grants the industry unprecedented "regulatory credibility." This move is seen as a significant institutional "unlock" in the crypto space, opening doors for other crypto companies.