Leading U.S. cryptocurrency exchange Kraken has made history in the crypto industry as it became the first cryptocurrency exchange to secure direct access to the Federal Reserve’s payments system.
On Wednesday March 4, an American crypto reporter, Eleanor Terrett, disclosed the huge milestone, noting that Kraken’s banking subsidiary, Kraken Financial, has been approved for a Federal Reserve master account by the Federal Reserve Bank of Kansas City.
The approval marks the remarkable success of Kraken’s years of patience, as the crypto exchange had applied for the approval way back in October 2020.
Kraken secures access to Fed’s master account
While Kraken can now directly access the Fed’s master account, the firm can now hold reserves and settle transactions in central bank money.
However, this access is limited as rulings infer the approval revealed that Kraken will not be permitted to lend, tap the Fed’s discount window or function as a traditional commercial bank, as signed by Federal Reserve Governor Christopher Waller.
The proposal, which is under the “skinny” master account framework, is yet to be completed. Hence, Waller revealed plans to finalize the proposal by the end of the year.
Notably, the approved payment system mimicked payments-only accounts offered by central banks in jurisdictions such as the United Kingdom, the European Union and Switzerland.
Fed greenlights crypto
While the approval positions Kraken for bigger expansion and global adoption, it also marks a major milestone for the crypto industry, as it suggests that the Fed is gradually embracing the crypto ecosystem.
As the Federal Reserve is seen integrating crypto, it comes with securing stable banking relationships with crypto firms.
It is important to note that granting Kraken Financial a master account not only opens a direct channel into the U.S. financial system but also implies that the Fed is satisfied with the firm’s anti-money laundering and sanctions compliance controls.
With this development, Kraken has paved the way for other major firms like Ripple’s U.S. banking partners, Custodia bank and other firms in line to gain similar approval to the Fed’s payment system.
Dan Burgin
Vladislav Sopov
