Kraken halts ACH transactions amid banking crisis
San Francisco-based cryptocurrency exchange Kraken says it will no longer process Automated Clearing House (ACH) following the failure of its payments partner, Silvergate Bank.
Once the go-to bank for crypto firms, many exchanges and digital asset providers parted ways with Silvergate as it faces significant financial headwinds and regulatory scrutiny. As a result, the beleaguered bank’s clients including Coinbase, Circle, Paxos and Crypto.com stopped using its ACH services.
“As of 27th March 2023, Kraken clients will no longer be able to use ACH deposits and withdrawals through Silvergate. We are working to make ACH funding options available through alternative funding providers as soon as possible and will communicate details with clients as soon as we can,” Kraken says.
The move comes barely a month after the crypto-friendly lender abruptly shuttered the Silvergate Exchange Network, which allows crypto exchanges and other clients to instantly transfer funds. This is understood to have played a role in Kraken and other major crypto institutions discontinuing ACH services.
For its part, Kraken said no other services will be affected by this change and its regular operations are continuing as it looks to transition to other banking partners to resume ACH deposits and withdrawals.
Kraken already has approval from a state regulator in the US to launch a crypto bank under an SPDI charter. It applied for a bank charter under Wyoming’s special-purpose depository institution law.
An SPDI bank charter permits Kraken to operate an independent bank that will reduce reliance on third-party financial institutions and allows the exchange to provide deposit-taking, custody and fiduciary services for digital assets.
Kraken expects to serve as a compliant bridge to the US dollar payments system and its stablecoin USDC. However, it will be required to comply with all federal and state laws, including ‘know your customer’, anti-money laundering and related regulations. It will also comply with SPDI and digital asset laws, which include requirements that fiat deposits be 100% reserved and meet the consumer protection standards.
Part of its settlement deal, Kraken shuttered its US cryptocurrency staking operation, which the exchange said it had been a small percentage of the exchange’s revenue. However, the SEC claims Kraken held assets worth over $2.7 billion for US customers, earning it around $147 million in revenue.
