ICBA asks Fed to review Kraken Financial’s Fed account

The Independent Community Bankers of America (ICBA) on June 18 asked the Federal Reserve Bank of Kansas City to review Kraken Financial’s one-year limited-purpose account and to consider added restrictions, suspension or non-renewal before the term expires. The letter asks the Reserve Bank to reassess whether the account remains consistent with the Fed’s account-access guidelines in light of recent fraud and illicit-finance concerns.

The Kansas City Fed approved Wyoming-based Payward Financial, doing business as Kraken Financial, earlier this year for a one-year limited-purpose account under the Fed’s Tier 3 review process. The approval grants access to Fedwire Funds settlement only and explicitly excludes intraday credit, discount-window borrowing, interest on balances and use by the Kraken exchange or other Payward Group subsidiaries.

ICBA told the Reserve Bank that the account’s current guardrails do not adequately address operational, legal, reputational and illicit-finance risks for an uninsured crypto-affiliated firm that is not subject to consolidated federal supervision. The letter cites investigative reporting that traced roughly $1.1 billion in bitcoin transfers from Kraken to cryptocurrency ATM operators, including large flows to two major kiosk operators. Kraken Financial maintains that it has robust compliance controls.

The bank group referenced federal complaint data and regulator findings about kiosk and ATM activity. A federal complaint-reporting system recorded more than 13,000 cryptocurrency ATM and kiosk complaints in 2025 with roughly $389 million in losses. A federal financial regulator issued a notice linking convertible virtual-currency kiosks to fraud, cybercrime and other illicit activity and flagged that some kiosk operators do not meet anti-money-laundering obligations. State authorities in at least two jurisdictions have taken enforcement or investigative actions involving kiosk operators.

On May 20 the Fed Board proposed standard terms for payment accounts at legally eligible institutions that are not federally insured. The proposal would formalize limits 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 pause Tier 3 access decisions while the policy work proceeds. Fed Governor Michael Barr dissented from the proposal, citing insufficient specificity and a lack of Fed inspection authority to address AML and terrorist-financing risks at institutions outside consolidated supervision.

The Kansas City Fed retains discretion over account conditions and renewal. Because the approval was time-limited and risk-scored, ICBA’s letter creates a formal path for the Reserve Bank to reassess risk and, if warranted, add restrictions, suspend access or decline renewal when the one-year term ends. If the Reserve Bank leaves the account unchanged, the approval will remain an existing example of a narrowly limited Fedwire access granted to a crypto-facing firm. If the Reserve Bank tightens conditions or denies renewal, access for crypto firms will continue to be decided case by case.

Observers identified the next concrete signals as any request from the Kansas City Fed for additional information from Kraken Financial, a public response to ICBA’s letter, a change in account terms, or the Reserve Bank allowing the one-year term to proceed toward renewal under current conditions.