However, Powell indicated that the bank does intend to offer certain services to clients, like the ability to borrow against bitcoin assets and invest in lending products.
“We hope to leverage blockchain technology to offer some additional services and ‘bitcoinized’ traditional financial services,” Powell added.
While acknowledging that the potential that lies in advanced financial services provided by crypto 2.0 protocols, Powell said that it remains “early days” for such projects. Still, he doesn’t rule out that they could enable Kraken to build a more robust cryptocurrency bank offering.
“With colored coins, sidechains and Counterparty, there’s all sorts of interesting things that could merge and we could see more assets being held in this bank account that could serve as collateral,” Powell mused.
He went on to suggest that the bank may seek to leverage the blockchain’s applications for identity, implying that the institution could help other bitcoin companies validate customers even as he cautioned that any of the products the bank offers will need to meet the approval of European regulators.
Fighting back against big banks
Powell sought to frame the survival of Kraken as depending on the success of the bitcoin ecosystem itself, stressing that his company’s main goal is to increase the size of the customer base it can serve in its current target markets, Europe and Japan.
He suggested that he sees the banking initiative as being in line with Kraken’s existing goals.
“You see that Google is trying to bring faster Internet connections to people, because that will increase the number of searches, and that’s their business,” he said. “We can give people a secure place to store and convert their bitcoin between fiat currencies and make bitcoin more functional.”
He further elaborated on his company’s own struggles gaining access to banking in the US market, noting that it has lost key partnerships even though it is structured specifically to avoid this concern. Kraken is owned by parent company Payward Inc., which Powell described as a software company that officially licenses software to the Kraken exchange.
“When we go to a bank and say we need an account, we can legitimately say that we’re offering software and nothing else,” Powell said.
Despite this, he said Payward has lost accounts at both Bank of America and Chase, accounts that were kept only for handling company expenses.
“Bank of America and Chase both terminated our account,” he said. “The reason they gave was that they evaluated our account, they do it once in a while, and they determined that for the protection of our users they didn’t want to service our account, some bullshit like that.”
These frustrations, he suggested, caused operational difficulties that he hopes a cryptocurrency bank will help avoid once and for all.
Regulatory hurdles low, risks high
Powell went on to state that in the context of some of the more ambitious projects in the space, the regulatory hurdles for the new bank are low.
“In Germany, bitcoin is basically money, so this wouldn’t be like having a bank account with multiple currency balances, one account with dollars and another in euros, it would be an account with euros and bitcoin. It fits within the framework that exists, and we’re not pointing out any problems there,” he explained.
When asked if there had ever been a bank created to meet industry-specific needs, Powell compared the new offering to credit unions that serve specialized employees like teachers and firefighters, but stressed that the bitcoin ecosystem requires unique solutions.
Still, Powell said that the project isn’t without its risks, noting that savvy banks could begin to serve the bitcoin industry, creating an ecosystem of new competitors.
Competition from banks aside, he said, should a sizeable portion of the ecosystem seek to utilize the institution, it would be easier for regulators to harm the industry as a whole.
Though optimistic about its potential, Powell suggested he sees the cryptocurrency bank as a necessary experiment, though one capable of falling short on its aims.
“It’s still not a foolproof plan,” he concluded.
- ^ these statements (www.coindesk.com)
- ^ even for day-to-day business (www.coindesk.com)
- ^ Kraken (www.kraken.com)
- ^ VC-backed (www.coindesk.com)
- ^ original release (www.coindesk.com)
- ^ crypto 2.0 (www.coindesk.com)
- ^ colored coins (www.coindesk.com)
- ^ sidechains (www.coindesk.com)
- ^ Counterparty (www.coindesk.com)
- ^ blockchain’s applications for identity (www.coindesk.com)
- ^ faster Internet connections (thenextweb.com)
- ^ stopped serving in February (www.coindesk.com)
- ^ Cryptocurrency Bank (www.cryptocurrency-bank.com)
- ^ Banking (www.coindesk.com)
- ^ Fidor Bank (www.coindesk.com)
- ^ Kraken (www.coindesk.com)