Kraken Cracked the Fed’s Vault. It Still Can’t Spend

In March, the Federal Reserve Bank of Kansas City approved a limited-purpose account for Payward Financial, which operates as Kraken Financial. The decision was historic:. Kraken, a Wyoming-chartered special purpose depository institution, became the first crypto-focused Tier 3 applicant to break through a Federal Reserve account-access system that had proved effectively impenetrable for institutions without federal deposit insurance or conventional federal prudential supervision.

But approval did not make the account operational. Brian Mathena, chief executive officer of Kraken Financial, told Wyoming lawmakers last week that the account has yet to go live. “We’re now playing a bit of catch up, trying to get the account operationalized and to expand our deposit product,” Mathena said. That disclosure turns what appeared to be a settled regulatory breakthrough into a more complicated payments-infrastructure story.

Kraken may have won permission to enter the Federal Reserve system. It is still waiting to find out what it can actually do there.

Read more: Banks and Credit Unions Win Crypto Trust by Explaining It First

Kraken Won a Fed Account. Why Can’t It Use It Yet?

A Federal Reserve account is valuable only when an institution can move money through the permitted Federal Reserve services. That requires more than a legal approval. The institution may need technical certification, settlement arrangements, liquidity processes, compliance controls, transaction limits, monitoring systems, contingency procedures and approval for specific use cases.

Conventional Federal Reserve accounts sit at the center of a bank’s payments operation. They allow institutions to hold central-bank money and can support access to services including Fedwire, FedACH and .the FedNow® Service. The exact capabilities depend on the services authorized and the institution’s operating arrangements.

Kraken did not receive a conventional, unrestricted account. The Kansas City Fed described the arrangement as a one-year, limited-purpose account subject to restrictions tailored to Kraken’s business model and risk profile. Services were to be introduced in phases, beginning with activity involving institutional clients. On paper, the system created a path. In practice, it made the risk standards so demanding that the path rarely led to approval. Tier 3 institutions, those lacking federal insurance and federal prudential supervision at the institution or holding-company level such as Kraken, receive the strictest review. Of 53Tier 3 or “TBD” tier applicants, only three have been approved: Kraken Financial, Numisma Bank and the Cooperativa de la Autoridad de Carreteras y Obras Públicas, a Puerto Rico-chartered institution, according to Fintech Business Weekly .

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Federal Reserve Vice Chair for Supervision Michelle Bowman effectively acknowledged that problem in March, at an American Bankers Association conference, when she described Tier 3 access as “unobtainium” and characterized the Kraken arrangement as a pilot for exploring how some nonbanks might connect to the Federal Reserve system.

A pilot is not the same thing as recognition that a new class of institutions is entitled to ordinary access. It is a controlled test, designed as much to produce information for the regulator as to deliver infrastructure to the participant. That explains the appeal of a limited-purpose pilot. It: It allows the central bank to separate legal access from commercial usefulness.

The Fed’s caution ripples outward. The June installment of PYMNTS Intelligence ’s Credit Union Tracker Series, “ The Wallet Effect: How Credit Unions Can Close the Digital Currency Access Gap,” a collaboration with Velera , found that stablecoin awareness falls short for 70% of credit union members, a gap that direct Fed access for crypto rivals could narrow or widen depending on which services regulators ultimately approve.

Other cryptocurrency executives see the same destination, even if the road stays narrow. “I want every bank to become a crypto bank . In a world where there are 4,000 banks, we’re powering 3,999 of them,” Anchorage Co-Founder and Chief Executive Officer Nathan McCauley told PYMNTS in an April episode of “ From the Block .”

See more: Kraken Fed Approval Is SPDI Bank Model’s Biggest Test Yet

A New Class of Fed Account

Kraken’s approval was a genuine breakthrough. Tier 3 applicants had spent years arguing that the Federal Reserve’s formally available route was practically closed to them. But the unfinished implementation shows that winning the eligibility argument was only the first contest. Kraken’s case raises a further possibility: operationalization may be functioning as a second stage of regulatory approval.

A limited account that handles only a narrow set of institutional transactions may still be valuable. But it would not give Kraken the full independence associated with a traditional master account, particularly if the company must continue using partner banks for retail flows, crypto-linked activity or products that sit outside the approved perimeter.

The critical measure is therefore not whether an account exists. It is how much of Kraken’s present banking architecture the account can replace. The company got through the first gate. It has now discovered another one behind it.

That hesitation extends beyond credit unions to the corporate treasury. “ Waiting for Certainty: Why Most CFOs Are Holding Back on Crypto and Stablecoins ”, a recent installment of PYMNTS Intelligence’s 2026 Certainty Project, shows that most middle market companies remain cautious about digital assets: 13% of firms use stablecoins and just 5% use other cryptocurrencies.

For now, Kraken’s master account remains a credential more than a product, real on paper but still unusable in practice. What happens next will say as much about the Fed’s tolerance for nonbank risk as it does about Kraken itself.