The Wyoming Banking Division approved the state’s first charter for a company to begin banking with cryptocurrency this week, marking the nation’s first approval of a new type of bank charter in more than 40 years.
By a unanimous vote Wednesday morning, the Wyoming Banking Board granted the cryptocurrency company Kraken the state’s first ever charter as a special purpose depository institution, allowing the company to begin offering financial services for users of cryptocurrencies — digital, encrypted forms of currency — in everyday life.
“We’re thrilled to work in a state so aligned with our philosophy and values,” David Kinitsky, CEO of Kraken Financial, said in a statement. “Wyoming is a rare and shining example of how thoughtful regulation can drive innovation for FinTech companies.”
The institution — legalized by a piece of 2019 legislation spearheaded by Rep. Tyler Lindholm, R-Sundance — will be the nation’s first and will soon allow both consumer and commercial-level services to anyone looking to bank using cryptocurrency without the use of third-party services.
Though its services will be limited in an effort to reduce competition with community banks — lending will not be permitted, for example — the charter will allow Kraken to offer clients the means to close real estate deals or to engage in wire transfers and other services traditionally within the realm of traditional banks, and it could potentially make cryptocurrency a more accessible medium for consumers.
But it also establishes Wyoming as a leader in the nation’s cryptocurrency markets and lays the groundwork for the state to become a key player in international markets. According to a blog post by Kraken on Wednesday, the company hopes to roll out its banking services globally, though it will initially limit cryptobanking to U.S. consumers exclusively.
“I’m excited that this day has finally arrived,” Gov. Mark Gordon said in a statement. “I’m proud that Wyoming is leading the way in digital assets and built the framework for this historic announcement to occur. This puts into practice what Wyoming saw as an opportunity to meet the challenges of a digital economy and allow businesses a way to hold digital assets safely.”
While it’s the state’s first special purpose depository institution, or SPDI, Kraken will not be its last. WyoFinancial, a venture backed by former Austin, Texas, resident Jeremy Drzal, is looking to make its own inroads into the state, while Avanti Financial — a company spearheaded by former Wall Streeter and Cheyenne crypto advocate Caitlin Long — is in the process of finalizing its application and is expected to have a hearing of its own in the near future.
While an important milestone for the company, Kraken still needs to obtain the approval of the Federal Reserve to officially begin operations, which Kinitsky said should not be a challenge in an interview with the Star-Tribune on Wednesday morning.
Though there were some initial concerns with the viability of Kraken’s application with the state after allegations that company leadership had falsified addresses on business records filed in California last December, state regulators told the Star-Tribune they had been granted access to the company’s financials and saw no cause to reject the company’s application.
Kinitsky said Wednesday that he does not believe the lawsuit will have any effect on its application with the Federal Reserve.
“We’ve been forthright with all of the relevant documents and relevant regulators, and everyone has been satisfied,” Kinitsky said.
In the meantime, Kraken is moving quickly. Kinitsky said it plans to begin phase one operations shortly, with a target date of March 1 to begin offering some limited services.
Though a physical location in Cheyenne is not yet finalized, Kinitsky — who recently completed a move to Cheyenne — said the company will likely have one established in the near future and begin hiring anywhere between 10-25 employees in the region.
Services will likely resemble the company’s current offerings in year one of operations, Kinitsky said, with plans to expand offerings on the retail and institutional side in years two and three, including cryptocurrency debit cards, wealth management services and others.