Saturday, February 24, 2024

Kraken Bank Gets Closer To A Federal Reserve Master Account: Report

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The Kraken Bank, a subsidiary of the Kraken crypto exchange received a routing number from the American Bankers Association and it is getting closer to being granted a Federal Reserve Master Account and getting the same access to the glboal payments systems as the traditional banks as we can see in our latest cryptocurrency news.

Crypto companies had a hard time accessing banking services and if Kraken gets this access, it will be in a good position to serve the market by being treader as a traditional bank. The American Bankers Association granted Kraken a routing number and brought it one step closer to getting a highly coveted Federal Reserve maser account that can allow it to deposit funds with the FED and get access to the global payments system. Avanti which is now known as Custodia Bank got the routing number a month ago.

Kraken Bank is a special purpose depository institution and a specific regulation allowed the companies to support digital asset banking activities. The University of Alabama School of Law Professor Julie Hill noted Kraken’s routing number on Twitter and said that ABA had to have issued this number in the past two weeks. While routing numbers are a huge step ahead for banks to see master FED accounts, the ABA routing number doesn’t indicate that a bank will receive a master account. Last year, the FED published a request for public comment on a proposal to evaluate the requests for accounts as well as payment services.

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At the time, Kraken Bank CEO David Kinetsky said that the FED’s approach was welcome. According to the reports last month, the FED recieved 46 comment letters and 281 form letters in response. The comment letters came from the financial institutions which seem to oppose the expanding FED master account access as well as crypto custody banks that support the expansion. In last month’s notice, the FED staffers sought to publish a new request for comment which supplemented last year’s proposal:

“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.”

Federally insured institutions will become subject to a less intensive review and be placed in the first tier. The second tier of institutions will be supervised by a federal bank regulator but don’t have to be federally insured. The third will generally receive the strictest level of review and will include firms that are not federally insured or supervised by federal entities.

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