Crypto Meets Banking: Kraken Makes Its Next Big Move
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| By Mark Gough |
At one point, cryptocurrency companies struggled to find banks willing to work with them.
Accounts were closed without warning, payments were delayed, and traditional financial institutions often wanted nothing to do with crypto.
Three crypto friendly banks were even shut down in 2023.
Now, the relationship is changing.
Kraken’s parent company, Payward, has agreed to acquire Saldo Finance, the Finnish company that owns Lithuania-based Saldo Bank.
If approved, the acquisition would give Payward a regulated banking operation inside the European Union. That would allow it to expand its offerings beyond crypto trading into deposits, lending, credit cards and other traditional banking services.
The deal is expected to close in 2027, although the financial terms haven’t been disclosed.
For Kraken, this is another step toward becoming a full-service financial platform. One where customers can manage cash, investments, and cryptocurrencies in one place.
And it puts the company in more direct competition with traditional banks.
What Kraken Is Actually Buying
Saldo Bank is a relatively small European digital bank, with approximately $190 million in assets. It operates in Lithuania, Finland, Sweden, and Germany, and is authorized to expand into the Netherlands.
Unlike a crypto exchange, Saldo already provides conventional banking services, including consumer loans, business lending, term deposits and credit cards.
It also provides lending infrastructure to other financial technology companies.
By acquiring Saldo, Payward would gain an established banking operation. Complete with regulatory licenses and access to several European markets — without the need to build everything from scratch.
And this isn’t an out-of-the-blue development, either. Payward has already been expanding into financial services beyond cryptocurrency trading. (More on that below.)
Related story: Kraken's IPO Is on Hold. Its Next Big Move Is Not
The company says it has originated more than $2 billion in loans and holds an electronic-money institution license from the Central Bank of Ireland.
It has also expanded into futures trading, tokenized equities and payments through businesses including NinjaTrader and xStocks.
A banking license would let Payward bring more of these services together under its own infrastructure.
From Crypto Exchange to Financial Platform
Kraken is still best known as a place to buy and sell digital assets.
But Payward is clearly trying to broaden that role.
The goal? To give customers access to cash accounts, investments, payments, borrowing and cryptocurrencies through a more connected service.
In short, it’s following the same playbook that Coinbase announced earlier this year.
There is a business reason for doing this.
Trading fees are cyclical: They rise when crypto markets are active and fall when volumes dry up. Banking products could make Payward less dependent on those market swings.
Deposits, cards, lending, and payments can create steadier revenue and deepen customer relationships beyond occasional trading activity.
It also puts Kraken in a position to compete against TradFi institutions that have added crypto to their offerings.
If Kraken can become part of a customer’s everyday financial life, it has a better chance of retaining that customer and offering additional services over time.
That appears to be central to Payward’s strategy under co-CEO Arjun Sethi.
The challenge, of course, is execution.
Building banking infrastructure is one thing; persuading customers to use Kraken as a broader financial provider is another.
Could You Borrow Against Your Bitcoin?
One possible extension of that strategy is lending secured against cryptocurrency holdings.
For example, imagine you have $100,000 worth of Bitcoin (BTC), but need $20,000 in cash now. You might prefer to borrow against your holdings without the need to sell part of the position.
That could preserve your exposure to the asset. And, depending on the jurisdiction, it could also help you avoid triggering an immediate tax event.
Crypto-backed lending already exists. But past attempts have shown the risks involved.
The failures of Celsius and BlockFi in 2022 showed how quickly these products can become vulnerable when collateral values fall and risk controls are weak.
A regulated banking operation may provide a more conventional framework for this kind of lending. With clearer standards, controls, and oversight.
To be fair, Payward has not confirmed that Saldo Bank will offer Bitcoin-backed loans. But the potential for the offering is now in place thanks to the Saldo acquisition.
If Payward does go down this route, you should still approach it with caution.
Regulation can improve oversight, but it cannot eliminate market risk. And borrowers would still face collateral and liquidation risks if Bitcoin’s price fell sharply.
Traditional Finance Is Moving in the Same Direction
The same convergence is happening from the other side of the market, too.
Instead of crypto companies adding banking features, established financial firms are adding digital-asset services to their existing platforms.
Just yesterday, Interactive Brokers announced that eligible customers can now stake Ethereum (ETH) directly through its brokerage platform.
That means investors can earn staking rewards and manage their cryptocurrency … all alongside their stocks, bonds, futures and other traditional investments. Interactive Brokers also introduced cryptocurrency trading for eligible European customers through its Irish operation earlier this year.
Meanwhile, the growth of tokenized stocks and other real-world assets is bringing more conventional financial products onto blockchain networks.
Related story: Tokenized Stocks Surge 395% in 30 Days as Crypto Goes Mainstream
Kraken is approaching this market from the opposite direction.
Traditional brokers are adding crypto services to their existing businesses. And at the same time, crypto exchanges are expanding into banking, investing and payments.
From opposite starting points, the direction of travel is the same: More providers want to offer a wider range of financial activities in one place.
Over time, customers may care less about whether a provider began as a bank, broker, or crypto exchange.
Instead, the decisions will be more about cost, convenience, and trust.
Now, a race is underway across markets to become the one-stop shop that can do it all with confidence.
Why Europe Is Important
Europe provides a useful starting point for Payward’s expansion thanks to its regulatory environment.
The Markets in Crypto-Assets Regulation (MiCA) has established a common regulatory framework for much of the EU’s crypto industry. Meanwhile, Europe’s financial passporting arrangements allow appropriately authorised institutions to provide certain services across multiple member states.
Saldo already operates across four European markets and has passporting arrangements for a fifth. And its banking licence would complement Payward’s existing electronic-money authorization in Ireland.
There is a significant difference between the two.
An electronic-money institution can provide payment services and hold safeguarded customer funds. But it isn’t the same as a bank, which is authorized to accept deposits and undertake lending.
Acquiring Saldo would give Payward access to capabilities that its existing electronic-money license doesn’t provide.
That said, the deal still requires regulatory approval. And Payward will need time to integrate the bank into its wider operations.
Customers should also understand that holding cryptocurrency on an exchange is not the same as holding an eligible deposit in a regulated bank.
The protections, risks and legal arrangements can be very different.
What Does This Mean for Crypto Investors?
I wouldn’t interpret Kraken’s acquisition as a direct catalyst for Bitcoinor the wider cryptocurrency market. After all, the purchase of a European bank doesn’t automatically increase demand for Bitcoin, Ethereum or other digital assets.
But it does tell us something about how the financial industry is developing.
Crypto companies are investing in the regulated infrastructure needed to compete with banks …
At the same time TradFi institutions are increasingly offering cryptocurrency and blockchain-based services.
What I’ll be watching is whether these companies can turn their expanding range of financial services into sustained customer growth and more predictable, recurring revenue.
There is also the question of whether customers will actually adopt these combined services.
Being able to offer the services is one thing. Convincing someone to move their primary financial relationship away from an established bank is another.
For Kraken, the acquisition could reduce its dependence on outside banking partners, expand its European customer offering and create additional sources of income.
But only time will tell how this move pays off.
And investors interested in Kraken’s upcoming IPO will want to pay extra close attention.
Outside of just Kraken, the broader trend is becoming difficult to ignore …
For years, crypto companies depended on traditional banks to move customer funds and provide access to the financial system. Now, some of those same companies are acquiring the infrastructure to offer banking services themselves.
Kraken may have started as a cryptocurrency exchange. But its parent company is building something considerably broader.
And over the next few years, the competition between traditional banks, brokers and crypto platforms looks set to become much more interesting.
Best,
Mark Gough
