Kraken's Bank Charter Bid Exposes the Custody Gap: What Unregulated Brokers Can't Build Their Way Around
Payward filed its application with the Office of the Comptroller of the Currency on May 8, 2026. If approved, the application would establish Payward National Trust Company, which would provide fiduciary custody and other services primarily for digital assets. PNTC expects to serve institutional clients and individual customers seeking regulated, bank-level custody and trust services for digital assets.
The filing arrives two months after Kraken Financial, Payward's Wyoming-chartered Special Purpose Depository Institution, became the first digital asset bank to receive a Federal Reserve master account. The approval makes Kraken Financial the first digital asset bank in U.S. history to gain direct access to the Federal Reserve's payment infrastructure. Through its Federal Reserve master account, Kraken Financial can connect directly to core U.S. payment rails, including Fedwire, without relying on intermediary banks.
Payward now has two distinct but complementary regulatory foundations: a state-chartered SPDI with Fed access and a pending federal trust charter under OCC supervision. "Kraken Financial and what we are building with the OCC are complementary pillars of Payward's regulated banking strategy aimed at advancing an efficient and accessible digitally native financial system," said co-CEO Arjun Sethi.
The architecture matters because the trust charter would confer something the SPDI alone cannot: federally regulated qualified custodian status. The trust charter would not authorize lending or deposit-taking, but would give Kraken a qualified-custodian designation that many institutional allocators require. A federal trust charter would strengthen its ability to offer custody services to a broader range of institutional clients, including pension funds and asset managers that require a federally regulated counterparty.
This distinction is not academic. Under the Investment Advisers Act, registered investment advisers must maintain client funds and securities with qualified custodians. A qualified custodian is a financial institution that meets specific regulatory standards to hold client assets. Under the Investment Advisers Act of 1940, registered investment advisers are generally required to maintain client funds and securities with a qualified custodian. Without that designation, institutional capital cannot flow through your custody rails regardless of how sophisticated your technology or how strong your client relationships.
The regulatory window has widened considerably. The OCC issued a final rule to clarify the longstanding authority of national banks limited to the operations of trust companies and activities related thereto to engage in non-fiduciary activities in addition to their fiduciary activities. The final rule would neither expand nor contract the OCC's authority to charter a national bank. The final rule is effective April 1, 2026. This codification removes ambiguity that had clouded earlier applications.
Payward is not alone in pursuing this path. Between December 2025 and March 2026, the OCC conditionally approved or advanced 11 crypto-related trust-charter applications, including firms such as Circle, Ripple, BitGo, Fidelity Digital Assets, Paxos, Bridge, Crypto.com, and Zerohash. The wave signals that federal regulators are processing these applications at a pace that would have been unimaginable two years ago.
Opposition remains vocal. The Independent Community Bankers of America has pushed back against the entire chartering trend. ICBA asked the OCC to do three things: pause its review of the Payward application, rescind a 2021 interpretive letter that broadened the powers of national trust banks and undertake formal rulemaking to clarify the charter's scope. More broadly, ICBA has repeatedly said that the sudden influx of applications demonstrates nonbank entities are seeking the benefits of a U.S. bank charter without satisfying the full scope of U.S. bank regulations, threatening consumers and the financial system.
The OCC has rejected these objections. The OCC has already moved the substance of Interpretive Letter 1176 into regulation itself with a final rule titled "National Bank Chartering," which took effect on April 1. The regulatory terrain has shifted, and the agency is processing applications accordingly.
For unregulated brokers, the strategic implications are stark. A national trust charter provides what an exchange license cannot: the legal authority to custody client assets under federal supervision, the ability to serve as a qualified custodian for institutional investors, and a pathway to integrate custody with execution under one regulatory umbrella. A national trust bank charter gives Coinbase a single federal regulator, the OCC, in place of the patchwork of state money transmitter licences it currently holds.
The alternative, stitching together state money-transmitter licenses and relying on partner banks, grows more constrained as regulatory expectations around third-party relationships intensify. A master account allows an institution to connect directly to Fedwire and other Fed payment rails, a capability traditionally limited to insured financial institutions. As a general matter, digital assets, fintech and other firms that are not FDIC-insured have generally depended on correspondent banking relationships to move fiat funds over these payment rails.
The operational reality is that custody, execution, and settlement form a single integrated service for institutional clients. Separating them across multiple unaffiliated entities introduces friction, counterparty risk, and operational complexity that institutional allocators increasingly refuse to accept. Kraken's multi-charter strategy addresses this directly: the Wyoming SPDI provides Fed access and settlement capability; the OCC trust charter provides federally regulated custody; and the exchange provides execution.
Building that stack from scratch is not a realistic option for most firms. The approval follows more than five years of sustained regulatory engagement, extensive examination, and operational scrutiny. The capital requirements, compliance infrastructure, and regulatory relationships necessary to obtain and maintain these licenses represent barriers that few firms can clear independently.
The question for unregulated brokers is not whether to pursue a bank charter, the answer for most is that they cannot. The question is how to access the regulated infrastructure that allows them to serve clients who require it. Kraken's trajectory illustrates what it takes to bridge the gap between an exchange and a bank: multiple charters, years of regulatory engagement, and deep investment in compliance architecture. For firms without that runway, the path forward runs through partnerships with institutions that have already built the rails.
Demand alone does not create a business. Permission does. Kraken is acquiring permission at scale. Unregulated brokers watching this unfold should recognize the message: the gap between what clients want and what you can legally deliver will not close through better technology or more aggressive sales. It closes through access to settlement authority you do not have and cannot build.
References
[1] Kraken Blog, "Payward files application for OCC National Trust Company," May 8, 2026
[2] OCC Bulletin 2026-4, "National Bank Chartering: Final Rule," February 27, 2026
[5] American Banker, "ICBA urges OCC to halt Kraken parent's trust charter bid," May 12, 2026
