What is Kraken?

Kraken is a major cryptocurrency exchange founded in San Francisco in 2011 and launched in 2013. It was founded by Jesse Powell, Thanh Luu and Michael Gronager, and emerged from Powell’s observations of Mt. Gox’s vulnerabilities and his desire to create a more secure and reliable cryptocurrency exchange. 

Powell’s foreboding about Mt. Gox would later be proved correct after its infamous security breach and collapse. Kraken was chosen to assist in the investigation and recovery of lost funds, further solidifying its credibility.

Kraken entered the Japanese and later European markets in 2015 while also introducing margin trading. In 2016, Kraken acquired two North American exchanges, Coinsetter and Cavirtex. It also acquired CleverCoin, a Dutch cryptocurrency exchange, establishing a European presence.

A successful Series B funding round in 2017 raised $100 million, which was used to improve infrastructure and customer support. In 2019, Kraken acquired Crypto Facilities, a regulated futures trading platform in the UK, allowing it to offer cryptocurrency futures and indices.

Kraken became the first cryptocurrency exchange in the U.S. to receive a Special Purpose Depository Institution charter from Wyoming, allowing it to offer comprehensive banking services. Kraken also launched Kraken Bank to bridge the gap between cryptocurrencies and traditional banking.

Record trading volumes in 2021 and the introduction of mobile trading apps for iOS and Android facilitated trading on the go. With regulatory approval to operate in new markets, including Australia and several European countries, Kraken continued to expand globally.

In 2022, Kraken announced plans for an IPO. The exchange also introduced new features, such as NFT trading, and expanded its DeFi offerings. Additionally, Powell stepped down as company CEO, replaced by David Ripley, who was previously the company’s COO. Despite no longer being the company’s CEO, Powell remains involved with the company and serves as the chairman of the board of directors and is the company’s largest shareholder. 

What Services Does Kraken Offer?

Kraken offers a wide range of services catering to individual and institutional traders, including spot trading, margin trading with leverage, and futures trading for numerous cryptocurrencies. The exchange also supports over-the-counter trading for large-volume transactions.

Kraken also provides staking services, allowing users to earn rewards on their crypto holdings. Furthermore, Kraken has introduced new services such as NFT trading and DeFi offerings, continuously expanding its portfolio to meet the evolving needs of the cryptocurrency market.

What’s Required for a Kraken Account?

To open a Kraken account, users must complete a registration process, including a know-your-customer (KYC) procedure that typically involves submitting a government-issued ID and proof of residence, depending on location.

Kraken employs a tiered verification system, where higher tiers offer increased limits and access to more features but require more comprehensive identity verification. Additionally, users must set up two-factor authentication (2FA) to enhance account security.

What Fees Does Kraken Charge?

Kraken employs a maker-taker fee model, where fees vary based on whether a user is a maker (providing liquidity) or a taker (removing liquidity). The fees are also tiered, decreasing with higher trading volumes over a 30-day period.

For spot trading, maker fees range from 0.00% to 0.25%, while taker fees range from 0.10% to 0.4%. Margin trading incurs additional fees based on the borrowed amount and the loan duration. Kraken also charges withdrawal fees that vary by cryptocurrency, but deposits are generally free, except for certain fiat transactions that might incur a small fee. Opening an account is free.

Kraken’s Regulatory/Legal Battles

Kraken has navigated various regulatory and legal challenges throughout its history. The exchange has faced scrutiny from U.S. regulators, including the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC), regarding its trading practices and compliance measures.

In September 2021, the CFTC fined Kraken $1.25 million for offering illegal margined retail commodity trading.

In November 2023, the SEC sued Kraken’s parent companies, Payward and Payward Ventures for allegedly operating an online securities trading platform without registering. The SEC also alleged Kraken was “commingling its investors’ assets with its own.” Kraken has been moving to have the lawsuit dismissed.