Kraken Eyes Crypto Derivatives Expansion Over FTX-Led Void

One of the world’s most controversial crypto exchanges, Kraken, is all set to expand its services to fill the void in the crypto derivatives market since the collapse of the Sam Bankman-Fried led FTX.

Previously, Kraken suffered numerous losses when the U.S Securities and Exchange Commission (SEC) ordered it to discontinue its offer and sale of crypto asset staking-as-a-service programs and penalized the exchange with $30 million.

Kraken aims to gain custody of a broader range of client assets in the United Kingdom with one of its subsidiaries, Crypto Facilities Ltd. The London-based subsidiary is in talks with the UK’s Financial Conduct Authority to expand its services.

New Horizons

Kraken acquired Crypto Facilities in 2019, and the London-based firm separately registered with the FCA in 2021 for custody of crypto assets. Now, the firm offers institutional investors leveraged and cash-settled futures contracts for cryptocurrencies like Bitcoin and Ether.

Crypto Facilities acquired the multilateral trading facility license in 2020. Based on the accreditation, Crypto Facilities plans to leverage the UK’s Client Money and Asset rules or CASS.

Under CASS, Crypto Facilities can offer futures contracts denominated in fiat currency, such as euros or pounds its, holding to the clients.

“It’s a key driver as we expand out what we do in the institutional market across crypto,” Mark Jennings, CEO of Crypto Facilities, said Monday.

Pre FTX Saga

The lucrativeness of Derivatives Trading is no hidden secret in the crypto industry. August’s combined spot and derivatives trading volume stood at $2.09 trillion across centralized exchanges, according to data from analytics firms like CCData.

“Prior to FTX we’d be hitting $700 million to $800 million a day” in trading volume, Jennings said, “We’re not at the pre-FTX kind of bull market volumes.”

Mark Jennings mentioned that the crypto derivatives market is going to a lower capacity than observed when Bitcoin price traded at $69,000.

After FTX’s collapse, the industry’s confidence shattered, marking the beginning of the bear market. Jennings added that the derivatives market is now closer to $100 million.

Will the derivatives market continue to rise and realize its true potential like it once did back in 2021? Due to the delay in the ETF approval the Bitcoin continues to move sideways. However, experts believe that the current scenario and the victory of Grayscale against the SEC will bring positive outlook on the price of Bitcoin.

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