Kraken Suspends Automated Clearinghouse Deposits and Withdrawals Due to Silvergate’s Closure – What Does This Mean for Users?
Kraken will suspend automated clearinghouse (ACH) deposits and withdrawals beginning March 27 due to the recent closure of its banking partner Silvergate Bank.
“As of March 27, 2023, Kraken clients will no longer be able to use ACH deposits and withdrawals through Silvergate,” the crypto exchange reportedly said in a statement, noting that it is actively looking for a new banking partner.
“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.”
Notably, Kraken stated this would not impact the exchange’s other services, adding that the company will resume ACH deposits and withdrawals as soon as it finds new funding providers.
As reported, Silvergate Bank’s parent company, Silvergate Capital Corporation, announced earlier this month that it has decided to wind down its operations and liquidate its subsidiary.
Silvergate was among the lenders hit hardest by the fall of FTX in November last year.
It suffered a bank run following the collapse of FTX and had to sell $5.2 billion of debt securities it was holding on its balance sheet at a significant loss to cover around $8.1 billion in user withdrawals.
Consequently, the bank incurred a $718 million loss, which reportedly exceeds the bank’s total profits since 2013.
Kraken to Establish its Own Bank Amid Recent Banking Dilemma
Kraken has put forward plans to establish its own bank amid the recent banking crisis that saw three major US banks collapse in one week.
The new bank, dubbed Kraken Bank, will be designed for crypto via the Wyoming Special Purpose Depository Institution (SPDI) framework that is meant to enable the bank to prioritize asset custody and safekeeping.
“We’re building a better kind of crypto & Bitcoin bank for our clients,” the exchange said in a recent announcement. The Wyoming, USA-based bank is called Kraken Financial, but “due to overwhelming demand, it will be known as Kraken Bank.” It added:
“We’re looking into products like deposit accounts in USD and crypto assets (ex. Bitcoin), multiple funding and payments options, institutional custody products (qualified custody for advisors and broker dealers), IRAs and many more.”
The move comes as the exchange has been recently in hot waters with the SEC over its staking product. In early February, the platform reached an agreement with the SEC to stop offering staking services or programs to clients in the country.
According to the SEC, Kraken failed “to register the offer and sale of their cryptoasset staking-as-a-service program,” which the commission now qualified as securities. Aside from the service’s halt, Kraken agreed to pay $30 million in disgorgement, prejudgment interest, and civil penalties.
Notably, the SEC has also recently sent a so-called “Wells notice” to Coinbase, threatening the crypto exchange with legal actions regarding some of its listed digital assets, its staking service Coinbase Earn, Coinbase Prime, and Coinbase Wallet.