Kraken inches closer to Fed Master Account, attains bank status
- Kraken Bank is one step closer to obtaining a Federal Reserve Master Account
- Kraken was recently granted a routing number by the American Bankers Association
Digital asset bank Kraken Bank, which is based in Wyoming, is now one step closer to obtaining a Federal Reserve Master Account. This will give Kraken the same kind of access to the global payments system as traditional banks, CoinDesk reported.
Kraken was granted a routing number
Kraken was recently granted a routing number by the ABA (American Bankers Association), which is part of the process before getting a Federal Reserve master account. Last month, Custodia Bank was issued a routing number. Like Custodia, Kraken is an SPDI (special purpose depository institution). This is a regulatory term specific to Wyoming, which allows companies to provide digital asset banking activities, including crypto transactions.
The first to point out Kraken’s routing number was Julie Hill, a professor at University of Alabama School of Law. According to her, they must have received the number within the last two weeks.
No guarantee Kraken will receive a master account
Being assigned a routing number does not necessarily mean the entity will get a master account for sure even though routing numbers are a crucial part of the process for banks seeking master Fed accounts.
Request to publicly evaluate accounts and payment services
The Federal Reserve published a request for public comment on a proposal to "evaluate requests for accounts and payment services" at Fed banks in 2021. The approach was welcomed by Kraken Bank CEO David Kinitsky at the time.
An overwhelming response
The Fed reported they received more than 300 comment letters in response from banks, credit unions, and other financial institutions. They were all against expanding Fed master account access, including cryptocurrency custody banks.
In its most recent notice, Fed staff made an effort to publish a new request for comment to augment the proposal from last year. The notice stated:
The supplemental notice includes a new section of the proposed Account Access Guidelines that would establish a tiered-review framework to provide additional clarity on the level of due diligence and scrutiny that Reserve Banks would apply to different types of access requests.
Three tiers of regulation
The Fed came up with three regulatory tiers. The third would be reviewed the most strictly and cover companies that are not supervised by a federal entity or federally insured. The third would include institutions that don’t have to be insured, but are supervised by a federal bank regulator. The lowest tier are federally insured and eligible entities.