Kraken, a prominent cryptocurrency exchange, is gearing up to diversify its services by entering the realm of traditional finance. The exchange has announced plans to launch US-listed stock and Exchange-Traded Fund (ETF) trading services in 2024, marking its first venture outside of the cryptocurrency domain. This move is seen as an attempt to capitalize on the growing interest in ETFs and expand its market share.
Kraken’s Bold Move Amid Regulatory Challenges
Kraken’s decision to enter the US-listed stock and ETF trading arena comes on the heels of a recent settlement with the US Securities and Exchange Commission (SEC). The exchange agreed to pay a $30 million settlement fee for failing to register its crypto-staking service as a security offering. As part of the settlement, Kraken discontinued its staking service for US customers.
Despite this regulatory setback, Kraken has not been deterred and is actively seeking a broker-dealer license from the US Financial Industry Regulatory Authority (FINRA). The exchange has already secured regulatory licenses and permits to operate in the United Kingdom, setting the stage for its international expansion.
Kraken’s New Venture: Kraken Securities
To facilitate its foray into US-listed stock and ETF trading, Kraken will establish a subsidiary known as “Kraken Securities.” This dedicated entity will oversee the trading of traditional assets, including stocks and ETFs, in both the US and UK markets. The move aims to offer Kraken’s eligible customers a seamless experience by allowing them to manage crypto, stocks, and ETFs within a single account.
Short-Term Goals and Institutional Custodian
Before the launch of US-listed stock and ETF trading services in 2024, Kraken has shorter-term goals in mind. The exchange plans to introduce a qualified custodian service specifically tailored for institutional clients in the near future. This custodian service will operate independently of Kraken and has already applied for approval from the state of Wyoming.
Competing in the Commission-Free Space
Kraken’s expansion into traditional finance will pit it against established players like Robinhood Markets Inc., known for its commission-free stock trading services. Other contenders in this space, including Public.com, are also eyeing the UK market. These platforms are poised to challenge the status quo by offering commission-free services to users.
Kraken’s Ongoing Regulatory Efforts
Beyond its expansion into the US and UK markets, Kraken is actively pursuing regulatory approvals to extend its services into Europe. The exchange plans to offer a range of fiat and crypto-related services in Europe, further solidifying its position in the cryptocurrency industry.
In summary, Kraken’s bold move into US-listed stock and ETF trading represents a significant step toward diversifying its offerings and expanding its presence beyond the crypto market. While regulatory challenges persist, Kraken’s commitment to compliance and innovation positions it as a formidable player in both the cryptocurrency and traditional finance sectors.