ICBA urges Fed review of Kraken Financial’s Fed account

The Independent Community Bankers of America (ICBA) asked the Federal Reserve Bank of Kansas City on June 18 to review and potentially restrict, suspend or not renew Kraken Financial’s limited-purpose Fed account before its initial one-year term ends. The account was approved under the Fed’s Tier 3 process and grants access to Fedwire Funds settlement.

The Kansas City Fed approved Wyoming-based Payward Financial, doing business as Kraken Financial, for a one-year limited-purpose account that permits Fedwire Funds settlement while excluding intraday credit, discount-window loans, interest on balances and access by the Kraken exchange or other Payward Group subsidiaries. The Fed described the account as separate from the Kraken exchange and other affiliates.

The ICBA letter argued the current account conditions do not sufficiently address operational, legal, reputational and illicit-finance risks posed by an uninsured crypto-affiliated firm that is not subject to consolidated federal supervision. The trade group asked the Reserve Bank to determine whether the account still complies with the Fed’s account-access guidelines and to consider adding limits, suspending access, declining renewal or terminating the account if risks warrant such action.

The ICBA tied its request to reporting that traced large bitcoin transfers from Kraken to crypto ATM operators. The tracing identified at least $1.1 billion in transfers in recent years, including about $700 million to one operator and roughly $245 million to another. Kraken maintains it has robust compliance controls. The tracing claims have not been adjudicated as regulatory findings.

Federal records cited in the ICBA request provide context for kiosk concerns. The FBI’s 2025 IC3 report recorded 13,460 cryptocurrency ATM and kiosk complaints with roughly $389 million in reported losses. Victims aged 60 and older accounted for about $257.5 million of those losses. The Financial Crimes Enforcement Network has warned that convertible virtual currency kiosks have been linked to fraud, cybercrime and other illicit activity.

State actions have included a California penalty against a kiosk operator of $675,000, including $105,000 in restitution, civil investigative demands in Missouri, and allegations from a D.C. office that a high proportion of deposits at one ATM operator were scam-related.

The ICBA letter arrived after the Federal Reserve Board on May 20 requested comment on a payment-account proposal for legally eligible institutions that are not federally insured. The proposal outlined standard terms such as no intraday credit, no discount-window access, no interest on balances, overdraft controls and illicit-finance risk mitigation, and it encouraged Reserve Banks to consider pausing Tier 3 access decisions while policy work continues. Governor Michael Barr dissented, writing that the proposed safeguards were “insufficiently specific and robust against money‑laundering and terrorist‑financing risks” and noting the lack of Fed examination and inspection powers for anti-money-laundering and Bank Secrecy Act procedures.

The Kansas City Fed’s supplemental notice at approval emphasized that the account is limited to Fedwire Funds and that Kraken Financial is separate from the exchange and other Payward affiliates. The ICBA letter does not by itself force a change; there is no public record that the Kansas City Fed has opened a termination process or found Kraken Financial non-compliant.

The Reserve Bank may respond by issuing a public statement, requesting additional information from Kraken Financial, changing the account limits, temporarily suspending access, or allowing the one-year term to proceed toward renewal under the existing conditions.