What to know : Kraken has secured a Federal Reserve "master account," giving its banking arm direct access to the Fed's core payment systems and allowing it to settle payments itself. The approval lets Kraken speed up deposits and withdrawals for large traders and institutional clients, but is limited, with Kraken not earning interest on reserves or accessing the Fed's emergency lending. The move is part of Kraken's efforts to expand its operations and move towards a potential initial public offering (IPO), following in the footsteps of other crypto firms like Coinbase and Gemini.
Kraken has secured a Federal Reserve “master account,” giving its banking arm direct access to the Fed’s core payment systems and making it the first crypto firm to operate on the same rails as traditional financial institutions.
The company said its unit, Kraken Financial, received approval for a Federal Reserve “master account,” the Wall Street Journal reports. The account allows direct access to Fedwire, a major interbank payment network that processes trillions in transfers a day.
Until now, Kraken had to rely on partner banks to send or receive U.S. dollars. Direct access changes that flow as the firm can now settle payments itself, which may speed up deposits and withdrawals for large traders and institutional clients.
Kraken Financial operates under a Wyoming charter designed for crypto-focused banks. The Federal Reserve Bank of Kansas City oversaw the application.
The approval is limited, however. Kraken will not receive the full set of services available to traditional banks as it won’t earn interest on reserves or be able to tap into the Fed’s emergency lending.
Kraken, a cryptocurrency exchange founded in 2011, has been slowly moving towards an iniital public offering (IPO). Several of its rivals, including Gemini, Coinbase, and CoinDesk’s parent company Bullish have already made their public markets debut.
Its parent company, Payward, has been on an acquisition spree, last month adding token management platform Magna to it. Last year, it acquired U.S. futures trading platform NinjaTrader for $1.5 billion and U.S.-licensed derivatives trading venue 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.
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