Kraken is intensifying its push for a banking license in Europe, marking a fresh phase in the transformation of crypto exchanges into regulated financial institutions. This initiative represents what analysts describe as a fifth cycle of consolidation, where the boundaries between centralized exchanges and traditional banks are increasingly blurred.
Kraken, one of the longest-standing crypto exchanges globally, is actively pursuing a European banking license, according to reports from CoinDesk. This European push adds to the banking charter the company has held in the United States since 2020, making Kraken a unique case in the crypto industry: an exchange seeking to operate as a regulated bank on two continents simultaneously.
The latest attempt comes alongside a significant legal win for Kraken — a $22 million arbitration award in a commercial dispute — which confirms the robustness of its operational framework in the face of legal challenges. Together, these developments — a US banking license, an arbitration victory, and a European banking pursuit — form what analysts identify as a fifth cycle in the convergence between crypto exchanges and traditional banking.
Kraken’s Dual Banking Strategy: United States and Europe
Kraken’s journey into banking regulation began in September 2020, when it obtained a Special Purpose Depository Institution (SPDI) charter in Wyoming, becoming the first crypto company to receive a US banking charter. This license, granted by the Wyoming Banking Division, allows Kraken Financial to offer deposit, custody, and payment services for digital assets within a regulated framework.
The Wyoming SPDI charter is particularly well-suited to crypto companies because it recognizes digital assets as a legitimate asset class within the banking system. Unlike traditional banks, an SPDI cannot lend out client deposits, which substantially reduces counterparty risk — a powerful argument for crypto investors concerned about fund safety following the collapses of FTX and Celsius.
However, this US license is not enough for Kraken. The exchange is now looking to Europe, where the MiCA (Markets in Crypto-Assets) regulatory framework, now in effect, provides a single regulatory passport valid across the entire European Union. Obtaining a banking license in an EU member state — potentially Lithuania, where Kraken has already initiated the process — would allow the exchange to offer its regulated services across all 27 EU countries without requiring additional approvals in each jurisdiction.
The $22 Million Arbitration Victory
At the same time, Kraken has strengthened its legal standing by securing a $22 million arbitration award in a dispute involving a client who had accumulated losses on leveraged positions. The ruling, subsequently confirmed by a California federal court, sets an important precedent regarding trader responsibility on leveraged trading platforms.
The case originated from margin trading operations where the client’s losses exceeded their collateral deposit. Kraken invoked its terms of service, which stipulate that uncovered losses on leveraged positions remain the client’s responsibility. The arbitration panel ruled in Kraken’s favor, and the federal court upheld the decision, rejecting the client’s arguments.
This legal victory strengthens Kraken’s position in discussions with European regulators. An exchange that can demonstrate a robust legal framework for handling disputes and protecting both the platform and its users is a more credible candidate for a banking license.
A Structural Shift: Exchanges Becoming Banks
Kraken’s strategy is not an isolated case. The broader crypto exchange sector is moving toward banking regulation, as seen in several parallel developments in recent months.
In the United Kingdom, Coinbase obtained registration as a Virtual Asset Service Provider (VASP) with the Financial Conduct Authority (FCA) in March 2023, a key step toward full banking integration within the British financial system. While VASP status is not equivalent to a banking license, it represents significant regulatory recognition that opens the door to more extensive financial services.
In Australia, Kraken’s 2022 acquisition of Swyftx had already demonstrated the American group’s ambition to establish a solid presence in the Asia-Pacific region. Swyftx, a popular Australian platform, brought Kraken a local user base and regional market knowledge, facilitating regulatory engagement with Australian authorities.
In the United States, EDX Markets — the institutional crypto platform backed by giants such as Citadel Securities and Fidelity — raised $76 million in a Series B round in March 2024. This substantial fundraising underscores traditional financial institutions’ interest in regulated crypto trading infrastructure, confirming that convergence between the two worlds is underway.
The Macroeconomic Context: A Favorable Window
This regulatory push from exchanges comes at a particular macroeconomic moment. At the time of these developments, Bitcoin was trading around $61,000 and Ethereum around $1,725, following a consolidation period marked by several months of reduced volatility.
Crypto markets are going through what analysts call a phase of “institutional maturation,” where the excessive volatility of the early years is giving way to gradual adoption by traditional players. In this context, holding a banking license becomes a decisive competitive advantage: institutional investors, as well as high-net-worth individuals, are hesitant to entrust their assets to unregulated platforms after the scandals that have marked the industry.
The European MiCA regulatory framework, which came into force for stablecoins in June 2024 and has been fully applicable since December 2024, creates a favorable environment for this type of expansion. Exchanges that obtain a banking license in an EU member state can offer not only trading services but also deposit, credit, and payment services — products that were previously reserved for traditional banks.
Regulatory and Operational Challenges
Despite these advances, the path to a European banking license is not without obstacles. National regulatory authorities, notably the Bank of Lithuania, must assess Kraken’s financial solidity, its anti-money laundering (AML) procedures, and its capacity to meet the capital adequacy ratios imposed by European banking regulation.
The stakes are considerable: a banking license subjects the exchange to much stricter regulatory oversight than that of a simple digital asset service provider. The requirements for minimum capital, financial reporting, and corporate governance are substantially higher. Kraken will need to demonstrate that it has the infrastructure and resources necessary to comply with these requirements.
Another challenge concerns the coexistence of regulated banking activities and traditional exchange operations. Kraken will need to establish strict Chinese Walls between its different entities to avoid conflicts of interest and ensure the protection of client funds.
The timing of this European banking offensive is also influenced by the political landscape. The European Commission has made crypto-asset regulation a priority in its digital agenda, and member states are encouraged to develop licensing frameworks suited to innovative companies. Lithuania, in particular, has positioned itself as a jurisdiction friendly to fintechs and crypto companies, making it a logical choice for Kraken’s license application.
Implications for Investors
For investors and platform users, Kraken obtaining a European banking license would represent a significant advance in terms of security and protection. Deposits held with a regulated banking entity generally benefit from guarantees — such as the EU deposit guarantee scheme, which protects deposits up to €100,000 per client per bank.
However, it is important to note that this guarantee would likely not apply to crypto assets themselves, but only to fiat currency deposits. Protection of digital assets would continue to rely on security measures implemented by Kraken, including cold storage and insurance policies.
Kraken’s evolution toward banking status illustrates a broader trend: the financialization of crypto assets. As exchanges adopt regulated statuses, they become bridges between the traditional financial system and the crypto economy, facilitating the entry of new capital while offering enhanced security guarantees.
Conclusion
Kraken’s dual offensive — a US banking license already secured and the pursuit of a European license — marks a turning point in the history of crypto exchanges. By embarking on this fifth cycle of convergence between exchanges and banks, Kraken validates a thesis that seemed utopian just a few years ago: a world where crypto trading platforms operate as regulated financial institutions, on par with traditional banks.
The $22 million arbitration victory, coupled with parallel moves by Coinbase UK, Swyftx Australia, and EDX Markets, paints a landscape where regulation is no longer perceived as a constraint but as a competitive advantage. For investors, this evolution is doubly positive: it offers both enhanced security and strengthened legitimacy for a sector still finding its place in the global financial system.
What remains to be seen is whether Kraken will succeed in convincing European regulators of its ability to operate as a full-fledged bank. The decision of the Bank of Lithuania, expected in the coming months, will be closely watched by the entire crypto industry, as it could pave the way for a new generation of exchange-banks in Europe.
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