Kraken is about to enter U.S. stock trading, as crypto platforms seek new solutions amid regulation and bear market

Author: Nancy, PANews

Twelve years after its establishment, veteran crypto exchange Kraken is about to venture into business outside the crypto field for the first time. On September 28, according to Bloomberg, citing people familiar with the matter, Kraken plans to launch U.S.-listed stock and ETF trading services in 2024. It has obtained regulatory licenses in the United Kingdom and has applied for it in the United States. At the same time, Kraken will also launch qualified custody services for institutional clients in the coming weeks. The reasons behind Kraken’s expansion of business services may be related to factors such as regulatory pressure and lower overall transaction volume during the crypto bear market.

The US stock trading function will be launched next year, and the diversified business layout will be accelerated

Bloomberg reported that Kraken plans to offer trading of U.S.-listed stocks and ETFs in the United States and the United Kingdom next year through a service established by a new unit called Kraken Securities. The platform has obtained British regulatory licenses and has provided services to the U.S. financial industry. The regulator applies for a broker-dealer license.

It is reported that after Kraken stock trading goes online, the system will prompt eligible customers to activate the service. Those who do so will see their cryptocurrency, stock and ETF portfolios represented as a single balance, people familiar with the matter said.

This means that Kraken will compete with platforms such as Robinhood and Public.com. Currently, these traditional brokerages are also expanding their businesses, including Public.com’s plan to expand its platform from the United States to the world, and Robinhood’s launch of brokerage services for retail investors.

Additionally, Kraken is also building out its prime brokerage service and launching qualified custody services for institutional clients in the coming weeks, people familiar with the matter said. The custody service will operate independently of the exchange, and Kraken has applied for approval from the state of Wyoming.

In response, a Kraken spokesperson said, "While we cannot comment on rumors or speculation, we are looking to expand and enhance our products so that customers can continue to securely and seamlessly access Kraken's complete product suite."

In fact, in addition to the above functions, Kraken has been actively diversifying its business layout recently.

In June this year, Kraken officially launched the NFT market "Kraken NFT" and does not charge Gas fees for trading NFTs on the platform. It has supported more than 250 NFT series on the Ethereum, Solana and Polygon networks;

In July, Crypto Facilities, an independently operated Kraken subsidiary, appointed hedge fund veteran and former Kraken executive Mark Jennings as its new chief executive for regulatory reasons, and in the following months negotiated with the UK Financial Conduct Authority to expand its Services are negotiated for custody of a wider range of client assets. If Crypto Facilities previously obtained a license to manage crypto assets, the company plans to provide crypto asset futures contracts for institutional investors;

In September, Kraken is gradually rolling out support for EUR and GBP deposits through PayPal for users in the UK and Europe (excluding Hungary and Croatia); the EMI certificate obtained by Kraken’s Irish subsidiary allows it to work with European banks to expand its Euro fiat Services and is registered as a Virtual Asset Service Provider (VASP) in Spain, enabling it to offer cryptocurrency exchange and custodial wallet services to Spanish residents.

Under the multi-line layout, Kraken’s market share is also expanding. Data from The Block shows that as of September 28, Kraken’s monthly trading volume market share has increased by approximately 66.9% from the beginning of the year, and is currently 3.69%.

Low trading volume and regulatory pressure**, crypto platforms look for new ways**

In the eyes of the outside world, Kraken's business expansion may be due to its response to regulatory risks and expansion of business income.

On the one hand, under the long crypto bear market and the sluggish macro environment, the trading volume of centralized exchanges (CEX) continues to decline, and profitability continues to be hit. The Block data shows that as of September 28, CEX’s monthly cryptocurrency trading volume plummeted to the lowest monthly level since October 2020. The exchange’s spot trading volume in September was below $264.58 billion, well below May 2022. Monthly transaction volumes in May and May 2021 were $1.4 trillion and $4.25 trillion respectively. Among them, Kraken’s monthly trading volume fell by approximately 43.3% from the beginning of this year.

On the other hand, as the United States and other countries are tightening regulations on the encryption field, Kraken has been scrutinized many times and faced tremendous regulatory pressure, even paying huge fines to resolve risks.

In February this year, after Kraken was charged by the U.S. SEC for providing unregistered securities, it had to end its pledge services to U.S. customers and pay a $30 million fine;

In March, after Canada issued a new regulatory framework requiring the segregation of custody assets, Kraken submitted a pre-registration commitment to the Securities Commission of Ontario, Canada, and committed to comply with the stricter regulations set by the Canadian Securities Administrators (CSA), the country’s financial regulator;

In July, Kraken was ordered by a judge to provide certain user information after resisting a subpoena from the Internal Revenue Service (IRS). The IRS wants Kraken to disclose information such as names, dates of birth, physical addresses, phone numbers and tax identification numbers from accounts that traded more than $20,000 in crypto transactions annually between 2016 and 2020, with the aim of identifying transactions conducted between 2016 and 2020. The identity of U.S. persons trading cryptocurrencies and their federal income tax liability;

In September, the Australian Securities and Investments Commission (ASIC) filed civil penalty proceedings against Bit Trade Pty Ltd, Kraken’s local service provider, accusing Bit Trade of failing to comply with the design and design of the margin trading products it provided to Australian customers on the Kraken trading platform. Distribution Obligations.

For Kraken, the diversified development strategy can not only meet the needs of a wider range of users and obtain more revenue sources, but also diversify regulatory risks to a certain extent.