Crypto exchange Kraken has announced that it will suspend Automated Clearing House (ACH) deposits and withdrawals as of Monday 27 March. The cause is attributed to the closure of Silvergate and the search for another banking partner.
Kraken suspends ACH deposits and withdrawals, without involving crypto
The new decision by the crypto-exchange Kraken is to suspend Automated Clearing House (ACH) deposits and withdrawals starting next Monday 27 March, without involving crypto and other services.
In an email sent to users, Kraken writes the following:
“As of March 27, 2023, Kraken clients will no longer be able to use ACH deposits and withdrawals through Silvergate. We are working to make ACH funding options available through alternative funding providers as soon as possible and will communicate details with clients as soon as we can.”
The main reason for this decision is undoubtedly the failure of the crypto-exchange’s banking partner, Silvergate Bank.
Kraken has now stated that it is now looking for a new banking partner so that it can reactivate ACH transfers as soon as possible.
Kraken: crypto-exchange must suspend ACH payments
The crypto-exchange relied on Silvergate Bank for ACH payments, which are essentially electronic money transfers from one bank to another.
Roughly speaking, in the United States, about 50% of commercial ACH transactions are handled by the Federal Reserve Banks, while the remaining 50% are handled by the Electronic Payment Network (EPN) and that is the Clearing House Payments Company’s ACH service.
It is safe to say that the Federal Reserve and EPN are the two quintessential US ACH payments operators.
With respect to Kraken’s news, there are those on Twitter who say that the ACH service seems to be already in a state of “distress,” without waiting for the announced decommissioning day.
I can also confirm I'm having ACH issues… right now… not the 27th.
Transferring MUCH less than what is in my account and getting this pic.twitter.com/GNBjFU9AVE
— Julian Traversa (@TraversaJulian) March 22, 2023
Silvergate Bank’s bankruptcy
The banking partner of Kraken and major player in the crypto sector, Silvergate Bank, filed for bankruptcy during this month of March.
And indeed, the parent company’s shares plummeted by an incredible 30% at that time, triggering a new wave of panic and uncertainty among investors and the public.
This was truly shocking news for many industry participants, as Silvergate Bank was known precisely for its “reliability” in the cryptocurrency space. Yet the announcement of the closure has come and it was Silvergate Capital Corporation that made it.
The holding company stated that the closure will be an orderly liquidation of the bank’s operations on a voluntary basis. This means that the closure and liquidation plan includes full repayment of all deposits to the bank’s customers.
Standing behind this major decision are precisely crypto assets and their bearish market that has shaped all of 2022, along with additional companies in the sector that have failed (such as FTX).
Kraken and plans to launch its own crypto bank
Earlier this month, Kraken’s Chief Legal Officer Marco Santori had also stated that the crypto-exchange has plans to launch its own crypto bank soon. Santori spoke of “Kraken Bank” announcing that it is in the home stretch very soon.
The present project is not a response to Silvergate Bank, but it is also a response from the crypto-exchange to how it has been treated by the US Securities and Exchange Commission (or SEC).
And indeed, Kraken had to shut down its on-chain staking services for customers in the US, signing a settlement in which the exchange was forced to pay a $30 million penalty. The SEC’s charge is violation of the Securities (Security) Act.
Not only that, Kraken had also announced at that time that it had decided to withdraw its use of Signature Bank for some financial transactions. And in fact, its non-corporate customers could no longer make USD deposits and withdrawals using Signature Bank.
The decision, in this case, was made because the bank appears to have implemented changes against those dealing in crypto.
Kraken adds Arbitrum (ARB) support
As the crypto-exchange moves away from the banking sector or proceeds to launch its crypto bank, in the cryptocurrency sector Kraken is pursuing its expansion.
📣 NEW token available: $ARB @arbitrum 💙🧡
✔️ Deposits are enabled
📆 Trading will be LIVE on Mar 23
*Geo restrictions apply
Learn more 👉 https://t.co/4w0DSWlYps pic.twitter.com/XAVvgGgIen
— Kraken Pro (@krakenpro) March 22, 2023
Kraken has just added the Arbitrum (ARB) token to its offering, enabling deposits as early as yesterday, while trading starting today.
The one actually making the announcement is Kraken Pro, Kraken’s advanced cryptocurrency trading platform.