Kraken began to open the new functionality to eligible users on Kraken Pro, allowing some of the monetized shares and ETFs to serve as collateral for futures and bonds. In this way, the user will be able to secure the leverage position of the encrypted asset without having to sell such holding.

This feature is currently open only to eligible users outside the United States. Kraken indicated that the futures collateral function applied to a number of areas outside the United States, including the EEA, and that the bond collateral function was also intended for users outside the United States but excluded the EEA.

Initial inclusion of 10 xStocks assets

The transaction alleged that the first 10 types of assets that could be used as collateral were SPYx, QQQQx, AAPLx, GOOGLx, TSLax, NVDax, HODx, MSTRx, GLDx and CRCLx.

These products belong to Kraken ' s xStocks system, where U.S. shares and ETF-expressed assets are tracked in block-chain tokens. Kraken previously described xStocks as a token security entry, covering over 60 United States equities and ETFs and supporting 24/5 transactions.

Kraken states that eligible xStocks assets are automatically identified as available collateral in the user account. As long as the appropriate futures or bond trading privileges have been opened for the account, the user is no longer required to transfer the asset to a separate product module.

Differences in discount rates for different assets

To control risk, Kraken has set discount rates and mortgage caps for different mortgages. Less volatile and more liquid broad-based ETFs receive relatively higher collateral and higher discounts for more volatile shares.

  • The discount rate for SPYx, QQQQx is 10% with a maximum mortgage value of $1 million
  • AAPLx, GOOGLx, TSLAx, NVDax, etc. Most share discounts were 20% with a ceiling of $250,000
  • HOODx, MSTRx discount rate of 30% and lower collateral level for GLDx and CRCLx

Kraken also indicated that these discount rates and caps could be adjusted in the future to update the collateral rules in the light of market volatility, liquidity and overall risk.

Currencyized assets continue to enter the trading system

This update continues Kraken's expansion around monetized assets in recent months. Previously, in May, Payward and Franklin Dunpton announced a partnership to introduce monetized currency market products into Kraken platform as collateral and cash management tools.

In June, Kraken and Maple also launched an agency-oriented, encrypted mortgage model, which uses an insolvency-segregated vehicle to take over the related credit business. By contrast, this XStocks update is more direct to the transactional users, with a focus on expanding the range of collateral available.

According to a recent hackson report, the monetized stock market has reached about $1.2 billion, and the cumulative value of xStocks has exceeded $25 billion. As more traditional financial assets are connected to encrypted trading systems, the use of tokenized products is being tracked from price to collateral and credit scenes.