What Is Kraken Crypto Exchange? How does It work? Complete Beginner’s Guide [2024]

Founded by Jesse Powell in 2011, just two years after Bitcoin’s launch, Kraken is one of the oldest crypto exchanges. Despite the completion of its development phase in 2011,, the Kraken platform went fully live in September 2013, after two years of testing and improvements. 

Today, this United States-based crypto exchange has carved out a reputation for being one of the platforms with top-notch security, advanced trading tools, and a good mix of coins to choose from.

Here is a detailed guide on how to use Kraken crypto exchange and the features offered by it. 

History of Kraken

Kraken was established in 2011 and formally launched trading operations in 2013, under the ownership of Payward Inc.34 The current CEO is David Ripley, who replaced co-founder Jesse Powell in 2022. The exchange aims to facilitate the easy movement of money between digital wallets and linked bank accounts for investors to trade cryptocurrencies efficiently.

Kraken’s Initial Market

Before Kraken became a leading crypto exchange, it primarily served European customers through a partnership with Germany-based Fidor Bank and had just started operating in Japan.

The New York Times. “Trustee Moves to Repay Creditors in Mt. Gox Bitcoin Exchange.” It also tried to help creditors of the defunct exchange Mt. Gox locate their bitcoin.

In 2016, Kraken announced its significant progress in these investigations and approved numerous claims from thousands of Mt. Gox creditors.

In 2014, as virtual currencies became more popular, Kraken and the exchange Coinbase were selected to feed BTC market data to Bitcoin price indices on the Bloomberg terminal. Integration with a leading market data provider helped Kraken gain popularity among the financial community. Bloomberg clients could access prices, charts, news, and social media posts for a cryptocurrency through Bloomberg services for the first time.

Expanding Services

Shortly afterward, Kraken partnered with the financial market chart service provider TradingView. The exchange has continued to add more cryptocurrencies to its trading platform and has enabled funding denominations in various fiat currencies, including the U.S. dollar, Canadian dollar, euro, and Japanese yen.

Kraken continued to grow in 2015, boosted by the launch of several new features popular with retail investors and professionals. The exchange introduced a margin trading facility and dark pools, allowing large orders to be placed discreetly and executed against similar-sized orders for a price advantage.

Beginning in 2016, Kraken expanded from spot markets into derivatives, futures, specialized markets, and other regions outside the U.S. Kraken now operates in over 230 countries across North America, Europe, Asia, and Latin America, excluding jurisdictions barred by regulations and sanctions. It has obtained registrations and licenses in the U.S., U.K., Canada, Australia, Italy, and Abu Dhabi in the U.A.E.

In April 2024, It acquired Tradestation Crypto from the online trading and brokerage service Tradestation Group, which Monex Group Inc., a Japanese global financial services company, wholly owns. According to reports, the acquisition of Trade Station, a licensed money transmitter, is intended to expand the exchange’s presence in the U.S.

Kraken and Other Exchanges

Similar to its competitors, Coinbase and Binance, Kraken offers an easy-to-use interface, 24/7 customer support, security features, digital wallets, custodial services, a mobile app, and a variety of the same trading products, services, and funding options.

However, the crypto exchange lists over 200 cryptocurrencies and over 600 cryptocurrency trading pairs, a selection that is slightly larger than Coinbase’s and far smaller than Binance’s. Kraken’s transaction fees also average higher than those of Coinbase and Binance.

Kraken’s trading markets include:

• Spot Trading: It is one of the largest cryptocurrency spot trading exchanges in the world. It offers a wide range of cryptocurrency trading pairs for normal buying and selling, including Bitcoin (BTC), Ethereum (ETH), Tether (USDT), and USD Coin (USDC).
• Margin Trading: The exchange offers margin trading for several cryptocurrency trading pairs. Margin traders can borrow funds from Kraken to trade with, which can amplify their profits or losses.
• Futures Trading: It offers futures trading for speculating on the future prices of a select number of cryptocurrency pairs.
• Over-the-Counter (OTC) Trading: The exchange offers OTC trading for large cryptocurrency transactions for institutional investors and other high-net-worth individuals (HNWIs).
• Staking: It offers staking for several cryptocurrencies, allowing users to earn rewards by holding their tokens.
• NFT Marketplace: It also offers an NFT marketplace where users can buy, sell, and create tokenized digital assets, such as artwork and collectibles.
• Application Programming Interface (API): It provides APIs that allow developers to integrate Kraken’s services into their own trading applications.

How does Kraken Work?

It is a cryptocurrency exchange, which means it acts as a middleman between people who want to buy and sell cryptocurrencies. Here’s a simplified breakdown of how it works:

• Buyers and Sellers: People who want to buy crypto (like Bitcoin or Ethereum) are matched with people who want to sell it. It doesn’t hold its own stock of crypto, instead, it connects buyers and sellers.
• Orders: Buyers and sellers place orders specifying the type of crypto, the amount, and the price they are willing to pay or sell for.
• Matching Orders: Its system matches buy and sell orders based on price. The goal is to find the best possible price for both sides of the trade.
• Transactions: Once an order is matched, the buyer’s and seller’s crypto holdings are transferred electronically through its secure system.

It offers a variety of features beyond just buying and selling crypto, including:

• Margin Trading: This allows users to borrow funds from Kraken to amplify their trades (with higher risk).
• Futures Trading: Speculate on the future price of cryptocurrencies.
• Staking: Earn rewards by holding certain cryptocurrencies.
• NFT Marketplace: Buy, sell, and create non-fungible tokens (NFTs).

Concerns About Kraken

It has fallen under scrutiny for falling short of government regulations and running into legal troubles that could impact its operations.

State of New York

In August 2015, it exited the New York market in response to the state’s introduction of the BitLicense, a regulatory framework for virtual currency businesses. The company expressed strong opposition to the BitLicense, arguing it was “abominable” and overly onerous.23

A BitLicense is a business license issued by the New York State Department of Financial Services (NYDFS) to companies that engage in virtual currency business activity in New York. BitLicense regulations require applicants to provide detailed information about their business operations, including their financial condition, risk management practices, and compliance procedures. The NYDFS also conducts an extensive background check on all applicants before issuing a BitLicense.

Once a company is granted a BitLicense, it is subject to ongoing regulatory oversight by the NYDFS. The NYDFS may conduct periodic examinations of BitLicensees to ensure they comply with all applicable laws and regulations. The NYDFS may also take enforcement action against BitLicensees that violate the BitLicense regulations.

In September 2018, the New York Attorney General (NYAG)’s office issued a report on the “integrity” of cryptocurrency exchanges, which raised concerns about Kraken’s practices. The report alleged that Kraken and other crypto exchanges had failed to properly verify customer identities, prevent market manipulation, and protect against money laundering. As a result, the NYAG had referred the exchanges to another state agency, the NYDFS, to investigate potential violations of state law.

The crypto exchange had refused to cooperate with the report’s fact-finding requests prior to its publication. After the report’s publication, Kraken’s then-CEO Jesse Powell denied the allegations, accused the NYAG of unfairly targeting the cryptocurrency industry, and likened New York state to an “abusive, controlling ex.

Office of Foreign Assets Control

In November 2022, the U.S. Department of the Treasury‘s Office of Foreign Assets Control (OFAC) announced a settlement with Kraken over allegations that the company had violated U.S. economic sanctions on Iran.

The OFAC alleged that it processed over 826 transactions, totaling approximately $1.68 million, for individuals who appeared to be located in Iran between October 2015 and June 2019. The alleged transactions violated U.S. anti-money laundering (AML) and sanctions prohibiting American companies from doing business with Iranian entities.

It denied the allegations but agreed to settle with the OFAC for $362,158.70. The company also agreed to invest an additional $100,000 in certain sanctions compliance controls.

Securities and Exchange Commission

In February 2023, the U.S. Securities and Exchange Commission (SEC) charged Kraken with failing to register its crypto asset staking-as-a-service program as a security.

The SEC alleged that Kraken’s staking program offered investors returns in exchange for their tokens and that these returns were similar to the dividends paid by traditional securities. As a result, the SEC argued that its staking program was an unregistered security and that it should have filed a registration with the SEC.

The crypto exchange denied the SEC’s allegations but agreed to settle with the SEC for $30 million. The company also agreed to cease offering crypto asset staking services.

The SEC sued Kraken again in November 2023 for allegedly operating as an unregistered securities exchange, broker, dealer, and clearing agency. This was the second time in less than a year that the SEC had taken action against it.

The SEC’s November 2023 lawsuit was similar to the previous lawsuit, but it also alleged that Kraken had failed to register its spot trading platform as an exchange. The SEC argued that its spot market is a platform where investors can trade securities and that it should have registered with the SEC as an exchange.

The crypto exchange again denied the SEC’s allegations, arguing that its spot trading platform is not an exchange and that it would “vigorously defend” itself in court.

“Kraken Continues to Fight for its Mission and Crypto Innovation in the United States.” In February 2024, the exchange filed to have the case dismissed.

How to Create an Account on Kraken?

Thanks to an simplistic and easy-to-use interface, creating a Kraken account is quite straightforward.

1. First, it is important to confirm that you are visiting its official website. Here is the link: https://www.kraken.com/ 
2. Next, click on the “Create Account” button and put your email and username and select a password. Once you agree to Kraken’s “Terms of Service and Privacy Policy,” click the “sign up” button.

1. Check your email inbox (which you used to register your account) for an activation key. 
2. Complete the account activation process and confirm your password to start using your new Kraken account. 

How Do I Fund My Kraken Account?

As a crypto exchange user, you can either fund your account with a debit or credit card, cash payments through wire transfer services, or with crypto deposits. 

Paying With a Card

1. To pay with your debit or credit card, start by clicking the Buy Crypto button on the top right section of the dashboard. 

1. Now select the “Add debit and credit” option in the drop-down menu. This will automatically update the amount field to your local fiat currency payment method. 
2. Then enter the details of the card you want to use and click “Add New Card.” Your card will be approved once the billing address is confirmed. This will take a few minutes.
3. With your card linked to this Crypto Exchange, you can now go back to the “Buy” button and select the crypto asset you want to buy in the drop-down menu. 
4. Once your purchase order is confirmed, you will receive a pop-up showing the digital asset you bought, the fees, and the amount. Click the “Buy Now” button to complete your purchase.

Paying With Cash 

The crypto exchange allows its users to fund their accounts through cash deposits made via a wire transfer from a bank account to Kraken’s MVB Bank. Keep in mind that all cash deposits on Kraken will result in a temporary 72-hour withdrawal hold. At the moment, Kraken only allows its US customers to fund their accounts from Bank of America. 

To make a cash deposit on it, follow the following steps.

1.  First, check that your account fulfills all the requirements, such as exact matching names on your Kraken account as the ones registered with your bank. 
2. Click the funding tab at the top of the dashboard and select your preferred currency in your ‘account balances’.
3. Enter the amount you wish to deposit and select the funding methods available. If only one option is available, then you may move to the next step. 
4. Review all the instructions and copy the bank account information provided by it. Paste it into the recipient section of the account from which you are trying to transfer the funds. Fulfill your bank requirements and hit the send button!

How to Deposit Cryptocurrency on Kraken?

You must first verify your account before making any crypto deposits. Once verified, you will be able to deposit any of the supported digital assets on Kraken from other exchanges or your hot or cold wallet. 

The process of depositing cryptocurrency is quite easy on it. Just loop up the currency you want to deposit on the dashboard and generate a new deposit address for that cryptocurrency. 

Confirm the deposit requirements and copy the deposit address. Do not type the address manually as it increases the risk of errors. 

Use the copied address on the other exchange from which you are making the crypto deposit. It supports over 60 cryptocurrencies including the following.

• USD Coin (USDC)
• Bitcoin Cash (BCH)
• Bitcoin (BTC)
• Ethereum (ETH)
• Litecoin (LTC)
• Cardano (ADA)
• Chainlink (LINK)
• Ripple (XRP) 
• Polkadot (DOT)

Is Kraken Safe?

In its 10 years of operations, Kraken has not had any incident of a major hack as is the case with most crypto exchanges. The platform also ranks as the topmost crypto exchange in terms of cybersecurity score and proof of funds according to CER’s score. CER (Crypto Exchange Rating) is a platform that offers a sophisticated ratting service for crypto exchanges. Some of its top security features include a 95% cold and offline storage of all its deposits. It claims that its cold storage wallets are also geographically distributed for improved safety. The platform also supports 2FA (two-factor authentication) via Yubikey and Google Authenticator.

What Is Kraken Pro?

Kraken Pro is the name of the Kraken crypto exchange mobile app available on both iOS and Android smartphones. It comes with all the features available on the desktop application such as staking portfolio balances, margin trading, and trading with limit and stop-loss orders.

Kraken Fee Structure

Like most crypto exchanges, it incentivized market makers who provide liquidity with a lower fee rate. Other factors with an influence on the fees paid include a 30-day volume metric that rewards those who trade more over the past 30 days with lower fees. Below is its fee structure for Kraken Pro. 

You may check out a detailed Kraken’s fee structure here. 

How to Get Verified on Kraken?

1. Click on your profile icon and then on the “Get Verified” button. 

1. It offers several levels of account verification options, including Express, Intermediate, and Pro. Both intermediate and pro-level require you to submit either your passport, driver’s license, or national identity card. 
2. Higher levels of verification require users to submit documents such as social security numbers and occupational information and complete a KYC questionnaire.

How Long Does Kraken Take to Verify an Account?

Lower levels of verification take less than 2 minutes while higher levels may take a few days as they include manual processes of account verification.

In a Nutshell

It is a reputable crypto exchange that takes security seriously. The platform has a history of conducting ongoing penetration tests to increase the level of protection on its system both via internal and external teams. Although its user interface is slightly advanced for the novice crypto enthusiast, it offers one of the best services for experienced crypto traders looking for a secure and reliable crypto exchange.

The Bottom Line

Kraken, despite facing challenges associated with the unpredictable and risky nature of cryptocurrencies, remains a popular virtual currency trading platform. It offers spot, futures, margin, perpetual, and over-the-counter trading in addition to non-fungible tokens and staking (in certain jurisdictions).

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