Kraken Expanding its London-based Subsidiary with the Help of FCA
One of the world’s leading cryptocurrency exchanges, Kraken, is currently in advanced discussions with the U.K.’s Financial Conduct Authority (FCA) to expand its subsidiary, Crypto Facilities, based in London. The expansion plans include venturing into new avenues of asset custody and fiat-denominated futures contracts.
Kraken’s Return to the UK Market
After acquiring Crypto Facilities in 2019, Kraken is now in talks with the FCA to broaden its asset custody services. Mark Jennings, the CEO of Crypto Facilities, revealed that they are also negotiating the introduction of futures contracts denominated in fiat currencies held for their clients. These contracts will mainly target institutional investors.
Following the exit of FTX from the derivatives market, Kraken sees an opportunity to fill the void. To accomplish this, they need to extend their multilateral trading license, which might take six to 12 months. Before FTX’s exit, the trading volume averaged $700 million to $800 million per day, but it has now dropped to around $100 million.
Regulatory Challenges in the UK
Kraken recently introduced deposit support for euros and British pounds via PayPal’s mobile application. However, new rules on crypto promotions have forced PayPal to stop allowing UK customers to buy crypto through its platform from October. Furthermore, the enforcement of the “travel rule” by crypto companies in the UK to combat money laundering activities has created compliance challenges due to inconsistent global application.
The crypto community is also debating guidelines established by the Financial Action Task Force (FATF), which require firms to disclose transaction identities. The unique aspects of the crypto industry, such as self-custodied wallets not managed by regulated entities, have raised concerns and criticisms regarding the adaptation of these norms.
Hot Take: Kraken’s Expansion and Regulatory Challenges
As Kraken plans to expand its London-based subsidiary and navigate regulatory obstacles, it demonstrates the crypto industry’s dynamic nature. The collaboration with the FCA and the introduction of new services and contracts reflect Kraken’s determination to thrive in the institutional market. However, the UK’s evolving regulatory environment and global inconsistencies pose challenges for both Kraken and other crypto companies. Striking a balance between regulatory compliance and the unique characteristics of the crypto industry remains a significant topic of discussion and debate.
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