Currently standing as the third largest cryptocurrency exchange, Kraken has made significant waves into the industry. With its beginner friendly platform, Kraken allows investors to buy and sell over 200 different cryptocurrencies. It also offers more advanced tools for the more seasoned investor. Yet, Kraken is currently facing a turbulent period after numerous allegations from the US Securities and Exchange commission (SEC).
Kraken’s beginnings
Established in 2011 and launched in 2013, Kraken was cofounded by Jesse Powell, Thanh Luu and Michael Gronager. However, the exchange saw a leadership change in 2022 when David Ripley replaced co-founder Jesse Powell as CEO. Kraken began gaining traction in 2014, when it was chosen alongside Coinbase to provide Bitcoin trading data to Bloomberg terminals. This move into mainstream financial data services helped Kraken gain credibility among traders. On the back of this momentum, the exchange also partnered with TradingView and expanded its offerings to include a variety of cryptocurrencies and fiat currencies like the USD, GBP, and JPY.
Based in San Francisco, Kraken facilitates the trading of various cryptocurrencies using multiple fiat currencies, including U.S. dollars, Canadian dollars, euros, and Japanese yen. As of January 15, 2023, it reported a daily trading volume of $333 million.Kraken’s website states: “Our mission is to accelerate the global adoption of crypto, so that everyone can achieve financial freedom and inclusion.”
The exchange supports a wide range of cryptocurrencies, including Ethereum ($ETH), Bitcoin ($BTC), and Solana ($SOL). It also provides support for non-fungible tokens (NFTs), along with futures and derivatives trading. Kraken boasts over 10 million clients across 190 countries, with its most recent quarterly trading volume topping $200 billion.
The crypto exchange added: “Kraken is consistently named one of the best places to buy and sell crypto online, thanks to our excellent service, low fees, versatile funding options and rigorous security standards — but this is only part of the story. We’ve been on the forefront of the blockchain revolution since 2011”.
Mt Gox involvement
Kraken made headlines in 2014 for its role in investigating the missing Bitcoins and managing the asset distribution to creditors of the defunct Mt. Gox exchange. Mt Gox was once the largest bitcoin exchange, but eventually filed for bankruptcy after struggling with debt and losing 850,000 Bitcoins. By February 2016, Kraken had made significant progress in its investigation, processing numerous claims from Mt. Gox creditors.
SEC scrutiny
However, Kraken is currently facing its only challenging period. The past year has been turbulent for the crypto exchange due to SEC scrutiny. In February 2023, the exchange agreed to a $30 million settlement and ceased its staking business. The SEC highlighted concerns about investors losing control over tokens and facing risks with little protection.
“When investors provide tokens to staking-as-a-service providers, they lose control of those tokens and take on risks associated with those platforms, with very little protection,” the SEC stated.
In November 2023, the SEC accused Kraken of operating as an unregistered securities exchange and commingling customer funds. Kraken refuted these allegations, emphasising the continuity of its services without disruption.
The SEC’s filing said: “Kraken has at times held customer crypto assets valued at more than $33 billion, but it has commingled these crypto assets with its own, creating what its independent auditor had identified in its audit plan as ‘a significant risk of loss’ to its customers.”
Kraken responded, stating: “The allegation is hollow; there is no such thing as an exchange, broker dealer, or clearing agency for investment contracts. The SEC is demanding compliance with a regime that doesn’t exist”.
Advantages of using Kraken
Despite the lawsuit, Kraken has still managed to maintain its edge on the industry and continue offering all of its services. Kraken’s advantages lie in its appeal to both novice and experienced traders, along with its robust security, low trading fees, and diverse cryptocurrency offerings.
While the Instant Buy feature for beginners has higher fees, the Kraken Pro platform offers more competitive rates and a broader range of trading markets. Advanced traders also benefit from margin trading features and a wide selection of coins.
Kraken’s pain points
Kraken’s Instant Buy program has been criticised for its high trading fees, which may not be immediately apparent to new investors. The platform has a 1.5% fee on all trading pairs and 0.9% for those trading stablecoins. Additionally, the platform supports only eight fiat currencies, these include the U.S. dollar, British pound, euros, and Japanese yen. This limited offering can be off-putting for those in locations with unsupported currencies, as it potentially incurs extra conversion fees for users in countries like India.
Kraken’s journey so far in the cryptocurrency landscape is marked by significant achievements and challenges. While offering a range of services catering to different investor needs, it continues to navigate regulatory hurdles and market dynamics.
