Crypto Exchange Kraken Is Going After a Full Banking License in Europe

The European crypto market is developing fast, and a major exchange has decided to take it up a notch. The Kraken crypto exchange is now pursuing a full banking license in Europe, and Lithuania has been named as the preferred country for securing this approval. 

The development comes as the European Union is introducing stricter regulations for crypto companies under its Markets in Crypto-Assets Regulation (MiCA). Many firms failed to secure this license. For example, Binance, which has started to shut down operations in the region. Meanwhile, some are looking for ways to strengthen their position in the region.

Kraken pushes for a banking license

Kraken is now actively pushing to conduct banking operations in Europe through Lithuania. Neither the company nor the Bank of Lithuania has confirmed this application. However, sources close to the matter said the exchange has stepped up efforts to make this a reality.

This license would allow the firm to offer services that typically would require a traditional bank. These include holding customer deposits directly, offering loans, among others, without having to rely on banking partners. This is similar to what Ripple is doing in the US.

Fintech giant Revolut also did the same in the region some years back. The firm secured a specialized banking license from the Bank of Lithuania in 2018. That approval allowed Revolut to provide banking services across the European Economic Area.

For the exchange, obtaining such approval could create new opportunities at a time when regulation is becoming increasingly important.

Europe's new crypto rulebook changes the game

This comes just as the European Union implemented its crypto regulation, MiCA. The new framework replaces the old policy that had different national rules with a single system covering all 27 EU member states.

The new rules permit companies licensed in one member state to serve customers in the whole of the region. However, firms must meet the requirements for capital reserves, customer protection, and governance standards. Kraken secured its own MiCA license in late June from the Central Bank of Ireland, joining the list of MiCA compliant crypto exchanges.

According to data, over 1,200 crypto firms operated under various national registrations. By May, just 210 companies had gotten full authorization under the new rules. That means fewer than one in five firms were able to make the transition before the deadline.

Some experts said that many smaller operators probably decided that obtaining and maintaining a license is too expensive under the new framework.

A bigger global licensing strategy

Earlier this year, Kraken Financial became the first digital asset bank to have access to the U.S. Federal Reserve's payment system. This allowed the company to connect to the same payment systems used by traditional financial institutions.

In May, Kraken's parent company Payward also got authorization from Dubai's Virtual Assets Regulatory Authority (VARA). This expanded its regulatory reach in the Middle East.

Notably, at the Money 20/20 Europe conference, CEO Arjun Sethi said the goal of the company over the next decade is to obtain more licenses in major regions. This could be either through acquisitions or by building operations from the ground up.