Kraken, a prominent player in the cryptocurrency industry since its establishment in 2011, is preparing to venture into the world of traditional finance by offering trading in US listed stocks and exchange-traded funds (ETFs). This bold expansion marks Kraken’s first major step outside the realm of cryptocurrencies. The development comes as Kraken aims to diversify its offerings and expand its reach in the financial markets.
Kraken’s entry into the traditional equities market will begin with services available in both the United States and the United Kingdom. These services will be facilitated through a newly created division known as “Kraken Securities,” according to a source familiar with the matter who preferred to remain anonymous due to the sensitive nature of the information. Notably, Kraken already possesses the necessary regulatory permits to operate in the UK and has submitted an application to the Financial Industry Regulatory Authority (FINRA) for a broker-dealer license in the United States, the source disclosed.
While specific details about the launch are yet to be disclosed, the source indicated that Kraken is targeting a 2024 launch date for its new service.
Kraken’s decision to embrace traditional equities trading comes after enduring numerous bear markets throughout its existence, including the cryptocurrency market downturn in the past year, which witnessed the downfall of companies such as FTX and Celsius Network. This strategic shift by Kraken aims to capitalize on the stability and diversification potential offered by traditional financial instruments.
Kraken’s foray into stock trading under the leadership of CEO Dave Ripley is not without challenges. It will be entering a competitive market already occupied by zero-commission brokerage platforms like Robinhood Markets Inc. and Public.com. Moreover, the retail trading frenzy spurred by the COVID-19 pandemic has significantly subsided, posing further challenges to Kraken’s entry.
Once Kraken’s stock trading platform is operational, eligible customers will be prompted to activate the service. Those who opt in will witness their Kraken portfolio of cryptocurrencies, listed stocks, and ETFs seamlessly integrated into a single balance, the source familiar with the matter noted.
Notably, FTX.US had also announced its intention to enter the stock trading arena in May 2022. However, the exchange faced significant setbacks when its parent company, FTX Group, experienced a collapse just six months later.
In addition to stock trading, Kraken is concurrently bolstering its prime brokerage services and preparing to launch a qualified custodian service tailored for institutional clients in the upcoming weeks, according to another source familiar with Kraken’s efforts. Importantly, the custody service will be operated independently from the exchange, and Kraken has submitted an application for approval to the state of Wyoming.
Kraken has maintained its competitive edge this year, even as trading volumes in the cryptocurrency market have waned. The platform has garnered market share, particularly at the expense of industry leader Binance, which has faced intensified regulatory scrutiny globally in recent months. As of the latest data from CCData, Kraken commands a 3.5% share of global spot trading, marking its highest market share since 2018.
When contacted for comments, a Kraken spokesperson declined to provide any additional information. The UK’s Financial Conduct Authority (FCA) did not immediately respond to requests for comment. A spokesperson from FINRA stated that the agency does not comment on membership applications.
Kraken’s strategic expansion into the traditional equities market represents a pivotal moment for the cryptocurrency stalwart as it seeks to navigate a rapidly evolving financial landscape and broaden its horizons beyond the crypto realm. As the launch date approaches, market observers will be closely monitoring Kraken’s progress in its latest endeavor.
Source: Bloomberg
