Crypto Cracks the Fed: Kraken’s Master Account Approval Signals a New Era for Digital Assets

The banking branch of the crypto exchange, set to IPO soon, will no longer need to rely on intermediary banks.

BY BRIAN CONTRERAS, STAFF WRITER @_B_CONTRERAS_

Kraken co-CEO Arjun Sethi. Illustration: Inc; Photo: Getty Images

The blurring of the line between crypto and mainstream finance is continuing apace under the Trump administration, with influential e-currency exchange Kraken announcing this morning that its banking arm has secured access to Federal Reserve payment infrastructure.

The Wyoming-chartered bank Kraken Financial now has a Federal Reserve master account, Kraken says—reportedly making it the first digital asset bank to secure such access.

“This milestone marks the convergence of crypto infrastructure and sovereign financial rails,” said Arjun Sethi, co-CEO of both Kraken and its parent company, Payward, in a press release announcing the development. “With a Federal Reserve master account, we can operate not as a peripheral participant in the U.S. banking system, but as a directly connected financial institution.”

Sethi goes on to explain that by integrating with the Fed’s infrastructure, Kraken’s banking platform will be able to quickly settle payments on the Fedwire funds-transfer service without needing help from intermediary banks.

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“Over time, this architecture could enable atomic settlement between fiat and crypto, institutional-grade cash management integrated with digital asset custody, and programmable financial products built within a fully regulated framework,” the co-CEO continues. “This is what it looks like when crypto infrastructure matures into core financial infrastructure.”

The newfound capabilities will be rolled out gradually, the firm says, with institutional clients enjoying first access. Thousands of banks and credit unions already use these payment mechanisms to transfer (on average) more than $4 trillion a day, the Wall Street Journal reports, although Kraken won’t enjoy all the same perks, such as making interest on central bank reserves.

“The prospect of fintechs and crypto firms securing access to Fed payment rails has alarmed many traditional banks,” WSJ notes. “Last month, the Bank Policy Institute and other trade groups warned that even limited access could threaten the U.S. payments system and financial stability.”

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