Kraken's Fed account removes bank intermediaries from wholesale crypto payments

Kraken can now move money faster and more cheaply by bypassing bank intermediaries. The Kansas City Fed granted the exchange's Wyoming banking arm a limited-purpose master account for an initial one-year period, allowing it to access Fedwire and hold limited balances overnight.

This access removes the need for traditional banks to act as middlemen in wholesale payments. However, the account is restricted: Kraken cannot earn interest on its reserve balances, cannot access emergency Fed lending, and is barred from the FedNow and ACH payment systems.

The move creates a path for other crypto and fintech firms, such as Ripple, Anchorage Digital, and Wise, to park funds directly at the Fed. As these firms shift deposits away from commercial banks, regional lenders face increased pressure on deposit growth and funding costs.