Kraken Hits Key Milestone in Quest to Gain Fed Account, Equal Treatment With Traditional Banks

Wyoming-based digital asset bank Kraken Bank moved a step closer toward being granted a Federal Reserve Master Account and gaining the same access to the global payments system as traditional banks.

Crypto companies have traditionally had difficulty accessing banking services. Kraken, should it be granted this access, would be well positioned to serve this market by effectively being treated as a traditional bank.

The American Bankers Association (ABA) recently granted Kraken a routing number, bringing it one step closer to receiving one of the highly coveted Federal Reserve master accounts, which would allow it to deposit funds with the Fed and access the global payments system. Custodia Bank (formerly Avanti) was given a routing number last month.

Kraken, as well as Custodia, is a special purpose depository institution (SPDI), a Wyoming-specific regulatory designation allowing these firms to support digital asset banking activities.

University of Alabama School of Law professor Julie Hill first noted Kraken's routing number on Twitter. She told CoinDesk the ABA had to have issued the number within the last two weeks.

While routing numbers are a critical first step for banks seeking master Fed accounts, the ABA assigning a routing number does not necessarily indicate that a bank will actually receive a master account.

Spokespeople for Kraken did not immediately return a request for comment.

Read more: Caitlin Long's Wyoming Crypto Bank Takes a Step Toward Fed Membership

Last year, the Fed published a request for public comment on a proposal to "evaluate requests for accounts and payment services" at Fed banks.

At the time, Kraken Bank CEO David Kinitsky said the Fed's approach was welcome.

According to a notice published last month, the Fed received 46 comment letters and another 281 form letters in response.

The comment letters came from financial institutions (including banks and credit unions) that appeared to oppose expanding Fed master account access, as well as cryptocurrency custody banks and related trade associations that supported the expansion.

In last month's notice, Fed staffers sought to publish a new request for comment that 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," the document said.

Federally insured eligible institutions would "be subject to a less intensive" review and placed in the first tier. Tier two institutions would be supervised by a federal bank regulator but not necessarily be federally insured. The third tier, which "would generally receive the strictest level of review," would include firms that are not federally insured or supervised by a federal entity.