What Is Going On?
When conceiving Kado back in May 2021 for a hackathon, our first call was to a US banking partner: Prime Trust. We were fortunate to find a US banking institution that is and was willing to work in Web3 — on some of the most cutting-edge projects in the space. Launching support for newer blockchains, working with borrow & lending protocols, and some of the largest centralized exchanges (CEX) in the world: OKCoin, BinanceUS, and more.
What Happened with Kado’s Partner Prime Trust?
This is (partly) a story of flying too close to the sun. Prime Trust was the rocket ship that got caught in her orbit. From allegedly onboarding (and subsequently offboarding) Celsius as a customer, enabling pay-in and pay-out services for BinanceUS, mint and burn services for Binance related products like TUSD, and allegedly enabling top FTX executives as an intermediary for political payments, to name a few. It is apparent the reach Prime Trust had.
What we’re beginning to learn now is Prime Trust began to connect and facilitate many suboptimal lines of business (see the court filing here). Still, these were far from the only issues. What transpired was seemingly a lack of execution and leadership: allegedly sending digital assets to inaccessible wallets and then trying to cover their tracks. Thankfully, Kado utilized Prime Trust for fiat pay-in/pay-out services and digital asset settlements only, and never provided custody of digital assets on behalf of customers nor Kado itself. Kado provides onboarding directly to self-custody for this exact reason – avoiding the custodial risk. 10+ exchanges and custodians have gone down for in the last year.
It begs the question, where were the regulators all along? If this happened over 18 months ago, why did it just get brought to light last week? The real people this hurts is you, users of Web3, who rely on trusted counterparties to do their job. If they can’t, and regulators hold them accountable years later, how can you trust the exchange you’re trading with? Enter… decentralization.
So, What Now?
As FTX and others have made U.S. regulators look incompetent, they are coming down hard on crypto. The SEC continues to operate under 1930s-era rules and is yet to create new rules and regulations, further enabling the gray area that many crypto companies operate in today. Abiding by a set of laws written in the 1930’s, the SEC, CFTC, and other US regulators are enforcing guidelines written for an entirely unimaginable industry at the time.
We’re determined to enable and offer U.S.-friendly infrastructure, but we are also taking the necessary steps to provide a truly global solution, whichever way U.S. regulators go from here.
Where Do We Go From Here?
Kado is building payment tools for a globally connected world. We’re building products to remove intermediaries and support a truly decentralized and open financial models. With how much effort the U.S. regulatory body is putting into disabling it, we all must be on to something. We’ve engaged with new U.S. banking partners who we hope to see stay on the right side of the road.
Our new partner has built strong relationships with regulators, enabled more secure checks and balances, and has a mindset for the future. We’re excited to partner with Fortress to enable fiat on/off-ramp services with a qualified custodian and Trust License (the top, tier-1 banking license one can receive). This will be live in days, not weeks (devs are doing something!). As we continue to operate without custodial / counterparty risk, we are confident that the infrastructure they provide will enable faster, better, and stronger digital asset onboarding and access. We will look to onboard more partners for redundancy in our solutions shortly thereafter.
We’ve secured our European license to further our global approach to Web3, removing the dependency of any US intermediaries. We’ve been working with local regulators, banks, and payments partners in San Marino to build out sound crypto policy, improve upon shortcomings of previous players, and build Kado’s infrastructure for the long-haul. This will enable Kado to onboard customers across the EU/EEA region directly and leverage cheaper payment methods like SEPA and Open Banking. Additionally, this will enable Kado to partner with new payment providers in LatAm (such as Brazil, Mexico, and Peru) and in APAC countries (including Hong Kong & Singapore to start).
We’re committed to building an accessible platform for all to benefit from the world of Web3. Kado is building better highways and throughways for the future of digital assets.
One person, one country, and one dream at a time. Onward and upward, friends.