(Kitco News) - As banking institutions increasingly turn their backs on blockchain-related companies, the cryptocurrency exchange Kraken has decided to take matters into its own hands with plans to launch a bank in the U.S. despite the challenging regulatory environment the industry currently faces.
This revelation came from Marco Santori, Kraken’s chief legal officer, during an appearance on The Scoop podcast. "Kraken Bank is very much on track to launch, very soon," Santori said.
"We're going to have those pens with the little ball chains. We're going to order thousands of them and attach them to the desks of Wall Street banks everywhere. With our logo."
Kraken has been one of the preferred targets of the Securities and Exchange Commission (SEC), which has cracked down on the crypto industry in recent months following the collapse of FTX in November.
In February, the SEC charged Kraken with the unregistered offer and sale of securities in February for its staking-as-a-service platform available to U.S. customers. To settle the charges, Kraken agreed to end its on-chain staking service for U.S. clients and pay $30 million in disgorgement, prejudgement interest and civil penalties.
SEC Chair Gary Gensler said that the move against Kraken should “put everyone on notice in this marketplace” that the SEC will be bringing enforcement actions against crypto-related companies that don’t adhere to U.S. financial laws.
Kraken neither admitted to nor denied the allegations in the complaint from the SEC, and its U.S.-based staking service represented only a small percentage of the exchanges’ revenue, Santori, said. “It does of course affect pretty dramatically our product mix in the U.S.," he added, suggesting that Americans are now more likely to seek out staking services that are offshore on riskier exchanges following this decision.
"It's really indicative of a pretty unfortunate situation here stateside," he said. "We've got a regulatory environment that is essentially forcing users off to use offshore exchanges that will gladly accept their business with so little as a VPN."
The ongoing struggles at Silvergate Bank, which was previously a top banking partner for many major crypto companies before falling on distressed times in the wake of the crypto market downturn of 2022, has only served to hasten Kraken’s plans to launch a bank in an effort to help maintain banking services and promote innovation within the industry.
"We're returning to an era where banks are going to be very cautious as to what accounts they open," he said. "Wall Street is going to be fine. Kraken and Coinbase are going to be okay. But the guy or gal who has a new idea about how to provide infrastructure to the crypto economy, it's going to be a really tough road over the next few years for them. No question."
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Last Wednesday, Kraken announced that it was ending some of its services with the crypto-focused Signature Bank, including the ability for non-corporate clients to deposit or withdraw U.S. dollars with the bank, citing changes made by Signature.
When asked about the idea floating around the cryptosphere that there is a concerted effort by the government to destroy the crypto industry in the U.S., Santori pushed back against that perspective but acknowledged that the events of 2022 have led to a consensus among some regulators that the industry cannot be allowed to operate unchecked moving forward.
"There's definitely not some anti-crypto group that meets every week in some shadowy room in D.C.," he said. "But there are a group of regulators who happen to all feel roughly the same way about crypto ... I think they just believe basically in one fundamental thing, that what crypto is today is what's important, and what it will be or could be in the future is really not."
