Update: Adds background.
Jesse Powell, the CEO of the first U.S. cryptocurrency exchange to receive a banking license, is stepping down.
Powell made history on Sept. 16, 2020, when his San Francisco-based Kraken cryptocurrency exchange became the first crypto industry firm to receive a special-purpose depository institution (SPDI) charter from the Wyoming Division of Banking.
Kraken announced that Chief Operating Officer Dave Ripley is succeeding Powell, who will remain with the company as chairman.
Kraken Bank, which is planning a phased opening this year, has also applied for a Federal Reserve master account, which would give it give it access to the same payments rails as traditional U.S. banks and gain a routing number — an important step toward Fed approval — from the American Banking Association in March
Custodia Bank, another holder of an SPDI charter, which Wyoming created specifically for crypto businesses, received its routing number in February.
While it isn’t much of an issue now, banks for years refused to do business with crypto businesses and canceled the accounts of any user, even sending funds to an exchange. That still rankles the industry now, and a Master Account allowing Kraken to deposit funds at the Fed would likely bring it — and Custodia — a good deal of business from companies that want secure access to mainstream banking services.
Powell founded Kraken in 2011, although it didn’t launch until 2013, and the exchange remains an important player in the crypto industry, with a 24-hour trading volume of almost $675 million. It is ranked fourth by industry data site CoinMarketCap, after Binance, FTX and Coinbase. However, its market share among the top 15 cryptocurrency exchanges has dropped by almost one-third this year, Bloomberg noted.
“As the company has gotten bigger, it’s just gotten to be more draining on me, less fun,” Powell told the outlet. “I still plan to stay very engaged with the company.” He remains the largest shareholder and member of the board.
“I look forward to spending more of my time on the company’s products, user experience and broader industry advocacy,” Powell added in a release.
While he is a popular figure in the cryptocurrency industry, he has been at the center of controversy more than once, often around his strong support for privacy issues.
In February, he announced on Twitter that Kraken would follow any Canadian government orders to freeze the assets of members of the Truckers Convoy protest, saying “If you're worried about it, don't keep your funds with any centralized/regulated custodian. We cannot protect you. Get your coins/cash out and only trade p2p.”
Powell added, “Might makes right in Canada. If someone dissents, you just confiscate their wealth, revoke their licenses, exclude them from the financial system...”
And in June he ignited what the New York Times called a “culture war” at the company over issues like choosing gender pronouns.
He also took Kraken out of New York rather than apply for its tough BitLicense.
The company announced that decision in an Aug. 9, 2015, blog post in a tone more typical of the industry at the time:
“Regrettably, the abominable BitLicense has awakened. It is a creature so foul, so cruel that not even Kraken possesses the courage or strength to face its nasty, big, pointy teeth.”
While the BitLicense is considered the gold standard in crypto regulation, a fair number of companies consider it so onerous that many will not serve New Yorkers. Powell has remained hostile to New York authorities, loudly refusing to fill out a voluntary but extensive questionnaire from the state’s attorney general sent to several top exchanges, including those like Kraken that didn’t do business there.
In an April 2018 tweet, Powell said, “Somebody has to say what everybody's actually thinking about the [attorney general’s] inquiry. The placative kowtowing toward this kind of abuse sends the message that it's ok. It's not ok.”
Somebody has to say what everybody's actually thinking about the NYAG's inquiry. The placative kowtowing toward this kind of abuse sends the message that it's ok. It's not ok. It's insulting. https://t.co/sta9VuXPK1 pic.twitter.com/4Jg66bia1I
— Jesse Powell (@jespow) April 18, 2018
The licensing regime remains controversial, with the industry comparing California’s Digital Financial Assets Law — which would require crypto financial services businesses to get a license that has been compared to BitLicense, if the governor signs it into law at the end of the month.
The Blockchain Association, an industry lobbying group, said the law is “shortsighted and unhelpful” and warned it “would impede crypto innovators’ ability to operate and push many out of the state.”
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