Kraken had a strange year. It won something no crypto company had ever won before. It also lost a third of its value.
The win was a Federal Reserve master account an account at America’s central bank, which lets Kraken move money through the same pipes real banks use. It got there through its Wyoming-chartered bank. No other crypto firm has one, not even Coinbase.
The loss was simpler. Deutsche Börse put $200m into Kraken for a 1.5% stake, which prices the company at $13.3bn, Bloomberg reported. In November it was worth $20bn. The reason is bitcoin: it fell from around $110,000 to roughly $73,800 over the same period. Exchanges earn fees on trades, people trade less when prices drop, so revenue drops with the market. Kraken had quietly filed to go public, but CoinDesk reported it put the listing on hold in March.
So why the gap? Because Kraken spent the year trying to stop being an exchange.
Alongside the Fed account, it partnered with Nasdaq on tokenised stocks, launched its own blockchain called Ink, and put out a debit card, Krak, which co-CEO Arjun Sethi discussed at the Wyoming Blockchain Symposium in August. Sethi told Fortune the goal isn’t to replace banks but to make the plumbing of finance work better.
Investors, for now, are still valuing it as an exchange.
Two things will decide who’s right. First, the Fed hasn’t given Kraken everything it doesn’t yet pay interest on Kraken’s reserves, which is the difference between a useful payment tool and a real banking business. Second, bank lobby groups have complained that the Fed should have finalised the rules for this new kind of account before handing one out. What regulators give quietly, they can take back quietly.
Deutsche Börse bought in with both questions open. Whether $13.3bn turns out to be a bargain won’t be answered by the IPO. It’ll be answered by the Fed.
