Kraken’s Federal Reserve Master Account Remains Inactive Months After Approval

Kraken Financial’s Federal Reserve master account has not been activated more than four months after gaining approval, according to CEO Brian Mathena during testimony to Wyoming lawmakers. Despite becoming the first crypto company granted such access in March, the bank is still working to operationalize the account.

Background and Current Status

The master account, which allows a bank to settle US dollar transactions directly with the Federal Reserve without intermediaries, is highly sought after by crypto firms. Kraken Financial received approval from the Federal Reserve Bank of Kansas City on March 4, marking a historic milestone as the first crypto organization to connect directly to the Fed. The bank had been pursuing this status since October 2020.

However, the account remains unused. Brian Mathena explained to the Wyoming blockchain select committee that efforts are underway to fully activate the account and expand deposit products. Customers continue to use an intermediary bank, Dart Bank, for US dollar wire transfers as noted on Kraken’s support pages.

The Federal Reserve granted Kraken a limited purpose master account valid for only one year, with undisclosed restrictions tailored to the bank’s risk profile. This arrangement has attracted scrutiny, including a letter from Representative Maxine Waters querying the unusual designation and operations such as access to the Fed’s ACH network or interest accrual on balances.

Kraken’s confidential IPO filing advances as the company seeks to use direct Fed access once active.

Challenges for Tier 3 Banks

Kraken applied as a Tier 3 institution, a classification for state-chartered banks without federal deposit insurance or federal oversight. Approval for such firms is extremely rare. At an industry event in March, Fed Vice Chair Michelle Bowman described Tier 3 access as almost impossible to obtain, likening it to "unobtainium." Analyst Jason Mikula confirms that only three out of 53 Tier 3 or unclassified applicants have ever been approved.

Kraken’s achievement made headlines, yet the delay in activating the master account illustrates the complexity of integrating crypto banks into traditional financial infrastructure. Meanwhile, customer wire transfers continue through traditional banking channels pending full operational status.

This article is for informational purposes and does not constitute financial advice.