Kraken's Corporate Parent Applies for National Bank-Like Status

In a move that could reshape its regulatory footprint in the United States, Payward—the corporate parent of the cryptocurrency exchange Kraken—has formally petitioned the Office of the Comptroller of the Currency (OCC) for a national trust company charter. The application, announced on May 8, would create a federally regulated entity known as Payward National Trust Company. This would bring Kraken under the same kind of federal oversight currently governing traditional trust banks, potentially expanding its service offerings and legal protections. Below, we break down the key questions surrounding this development.

What exactly did Payward file with the OCC?

Payward, the firm that owns and operates Kraken, has submitted an application to the U.S. Office of the Comptroller of the Currency for a national trust company charter. According to the company's press release, if the OCC approves the request, the new entity would be called Payward National Trust Company. This charter would allow Payward to act as a trust company under federal law, providing services that are often limited to state-chartered trust firms but with the added benefit of nationwide operations. Unlike a standard banking charter, a trust charter specializes in holding and managing assets on behalf of others, making it a natural fit for a crypto exchange that custodies digital assets for millions of users.

Why is Kraken's parent seeking a federal trust charter now?

The timing and rationale reflect a broader push for regulatory clarity in the cryptocurrency space. By securing a federal charter, Payward aims to standardize its operations across all 50 states, avoiding the patchwork of state-level money transmitter licenses that currently govern its business. A national trust charter also signals to regulators and customers that Payward is willing to submit to rigorous federal oversight, which could boost trust in the wake of several high-profile crypto failures. Additionally, trust companies can often offer higher interest rates on deposits and more sophisticated custody services than standard money transmitters, potentially opening new revenue streams for Kraken.

What specific powers would a national trust company charter grant?

If granted, a national trust company charter would empower Payward to act as a fiduciary, meaning it could manage assets, administer trusts, and serve as a custodian for clients—all under federal supervision. This is distinct from a full banking charter, because trust companies generally cannot take deposits or make commercial loans. However, they can hold customer funds in a trust capacity, which is exactly how many crypto exchanges operate when safeguarding digital assets. The charter would also allow Payward to operate interstate without needing separate approvals in each state, reducing compliance costs and legal complexity. Moreover, it would bring Payward under the OCC's supervisory framework, which includes regular examinations, capital requirements, and consumer protection rules.

How would this affect Kraken's customers and their assets?

For everyday users of Kraken, a federal trust charter could mean stronger legal protections for their digital assets. Federally chartered trust companies are required to follow strict segregation rules, meaning customer assets must be kept separate from the company's own operating funds. This reduces the risk of loss in the event of insolvency—a concern that has plagued the crypto industry. Customers might also see new services, such as estate planning through trusts or more sophisticated yield-bearing products, as the trust structure is designed for long-term asset management. On the downside, the increased regulatory burden could lead to higher fees or more restrictive account policies, though no changes have been announced yet.

What are the next steps in the approval process?

The OCC will now conduct a thorough review of Payward's application, which typically takes several months to a year. The process includes a public comment period, during which competitors, consumer advocates, and other stakeholders can submit feedback. The OCC will also assess Payward's capital adequacy, management team, and operational plans to ensure the firm meets the standards for a national trust charter. If approved, Payward National Trust Company would become one of the first crypto-native firms to hold such a charter, joining a select group of financial institutions that operate under the OCC's federal supervision. Kraken has not provided a specific timeline, but industry analysts expect a decision by early 2025 at the earliest.

How does this charter compare with other crypto regulatory moves?

This application represents a different approach compared to other crypto firms that have sought state-level trust charters (like Wyoming's Special Purpose Depository Institution) or full banking charters. Instead, Payward is aiming for a middle ground—a federal trust charter that provides national scope without the heavy capital and lending restrictions of a bank. For comparison, Anchorage Digital received a national trust bank charter from the OCC in 2021, but with more expansive powers. Payward's application is narrower, focusing on trust and custody services. This strategy could become a blueprint for other large exchanges seeking to operate legally across the U.S. without having to comply with dozens of state regulators. However, it also raises questions about how the OCC will handle the unique risks of crypto assets, such as market volatility and cybersecurity threats.