TL;DR
- Kraken now allows European traders to use cryptocurrencies as collateral on its derivatives platform.
- The company applies different haircuts based on volatility and converts collateral value into U.S. dollars.
- Its combination of licenses unifies international and European liquidity, enabling broader institutional adoption of crypto derivatives.
Kraken now allows European traders to post cryptocurrencies as collateral on its MiFID-regulated derivatives platform, expanding the initiative that began earlier this year with fiat-based collateral.
The update follows the company’s receipt of a MiCA license from the Central Bank of Ireland and Multilateral Trading Facility (MTF) approval from the UK’s Financial Conduct Authority, ensuring a consistent and supervised regulatory framework for clients across the European Union.
The exchange launched derivatives in the EU in May, though regulators initially restricted the use of crypto collateral. Kraken’s Director of Derivatives, Alexia Theodorou, said the company worked closely with CySEC and ESMA to educate regulators on the structure of perpetual contracts and ensure their proper classification, allowing crypto assets to now be incorporated within regulatory guardrails.
The new framework enables European traders to deposit cryptocurrencies as collateral. Kraken applies varying levels of haircuts depending on the volatility of each asset and automatically converts the collateral’s value into U.S. dollars for margin and liquidation calculations, reducing operational risk and improving platform stability.
Kraken Aims to Unify Global and European Liquidity
The change responds to strong demand from institutional clients, particularly crypto-native firms, seeking greater flexibility to use digital assets in derivatives trading. According to Theodorou, offering crypto collateral under a regulated European regime could attract new liquidity flows and balances to Kraken’s order book, reinforcing its position as a leading provider of perpetual contracts in the region.
By combining MiFID, MiCA, and MTF licenses, Kraken can maintain unified global and European liquidity without fragmenting markets, improving efficiency across its trading venues. The company believes this approach will support institutional adoption of regulated crypto derivatives in Europe and help set a benchmark for exchanges seeking to integrate digital assets securely and transparently.
Kraken has successfully strengthened its regulated crypto derivatives strategy in Europe, ensuring full compliance while providing professional investors with access to advanced trading instruments
