Kraken is the inaugural cryptocurrency firm to obtain access to a Federal Reserve master account, according to WSJ.

The authorization enables Kraken to expedite deposits and withdrawals for substantial traders and institutional clients, though it is restricted.

(PiggyBank/Unsplash, modified by CoinDesk)

Key Points:

• Kraken has obtained a Federal Reserve “master account,” granting its banking division direct access to the Fed’s primary payment systems, enabling it to handle payments independently.
• This authorization allows Kraken to accelerate deposits and withdrawals for significant traders and institutional clients, but it is constrained, as Kraken will not earn interest on reserves or utilize the Fed’s emergency lending facilities.
• This initiative is part of Kraken’s strategy to broaden its operations and move towards a potential initial public offering (IPO), following the examples set by other crypto companies such as Coinbase and Gemini.

Kraken has gained a Federal Reserve “master account,” which provides its banking division direct access to the Fed’s essential payment systems, making it the first cryptocurrency entity to function on the same infrastructure as conventional financial institutions.

The company indicated that its segment, Kraken Financial, has received approval for a Federal Reserve “master account,” as reported by the Wall Street Journal. This account permits direct access to Fedwire, a key interbank payment network that manages trillions in transactions daily.

Previously, Kraken depended on partner banks to send or receive U.S. dollars. This direct access modifies that process, as the firm can now independently settle payments, potentially expediting deposits and withdrawals for substantial traders and institutional clients.

Kraken Financial operates under a Wyoming charter designed for banks focused on cryptocurrency. The Federal Reserve Bank of Kansas City supervised the application process.

However, the approval is limited. Kraken will not enjoy the complete range of services offered to traditional banks, as it will not earn interest on reserves or be able to access the Fed’s emergency lending options.

Founded in 2011, Kraken has been gradually progressing towards an initial public offering (IPO). Several competitors, including Gemini, Coinbase, and CoinDesk’s parent company Bullish, have already entered the public markets.

Its parent organization, Payward, has been actively acquiring companies, recently adding token management platform Magna. Last year, it acquired the U.S. futures trading platform NinjaTrader for $1.5 billion and the U.S.-licensed derivatives trading venue Small Exchange for $100 million.

Additionally, it has ventured into the tokenization sector through the acquisition of Backed Finance, a specialist in tokenized stocks and the issuer of xStocks.