January 25, 2022 - 9 min read
Kraken and Binance are currently two of the world’s most popular cryptocurrency exchanges. While both offer a wide array of cryptocurrency trading options and associated services, they each have significant differences which traders should be aware of. In this article, we’ll review some of the similarities and differences between these platforms, so that traders and investors can make an informed choice when it comes to their money.
Binance is currently the world’s largest crypto exchange and has a significantly larger trading volume than Kraken. On many days, Binance’s trading volume exceeds $30 billion, while Kraken generally averages between $1-2 billion daily.
Kraken was founded in 2011 by entrepreneur Jesse Powell and was officially launched in 2013. Powell was reportedly inspired to found Kraken after visiting the headquarters of Mt.Gox, the cryptocurrency exchange that was famously hacked in 2011, resulting in the loss of over $450 million for investors. Kraken is based in San Francisco. Since then, it has raised capital in several rounds, beginning with a $5 million Series A round in March 2014.
In 2017, the company acquired the popular crypto news website Cryptowatch and hired its founder and CEO as a corporate advisor. In September 2020, the company was given an SPDI (special purpose depository institution) charter in the state of Wyoming, making it the first crypto exchange to receive this type of certification in the U.S. As of March 2021, the company was valued at $20 billion. Kraken has never publicly reported any hacks.
Binance was founded in 2017 in China by entrepreneur Changpeng Zhao, who had a previous career developing software for high-frequency equities trading. Later, Binance’s headquarters was moved to the Cayman Islands due to China’s crackdown on bitcoin and other cryptocurrencies.
As we’ll mention later, Binance’s platform is not available in the United States, though it does have a limited subsidiary platform, Binance.US, for American users. In May 2019, Binance announced a series of hacks that led to approximately $40 million of losses via the theft of approximately 7,000 of Bitcoin.
When comparing exchanges like Kraken and Binance, it’s essential to understand the regulatory environment in which they operate. As of May 2021, the U.S. Department of Justice (DOJ), and the U.S. Internal Revenue Service (IRS) announced that Binance was under investigation for both money laundering and tax issues.
According to well-known blockchain forensics firm Chainalysis Inc., more money associated with illegal activity and money laundering flowed through Binance than any other crypto exchange, with money laundering-related transactions estimated at more than $700 million of trading volume last year alone. While this could be a function of the platform’s large size, regulators believe that it can also be attributed to the platform’s lack of regulatory oversight and highly limited KYC (know your customer) standards.
In contrast, U.S.-based firms like Kraken and Coinbase have instituted more rigorous KYC and AML (anti-money laundering) standards in recent months, requiring customers to enter personal information such as home addresses and telephone numbers to confirm their personal identity.
In addition to U.S.-based investigations, Binance is also facing heightened scrutiny in the U.K, where the country’s Financial Conduct Authority (FCA) ordered the firm to stop all regulated activity this June.
Because Kraken’s trading volume is smaller, traders may be more likely to suffer from slippage on the platform. Slippage refers to the differences in price between a trader’s intended order price and the actual price at which they purchase the asset. To prevent trading losses for customers, Kraken has instituted something called a “fat finger” warning in order to warn traders if it appears that slippage will occur on a trade. According to Kraken, a warning will appear if the “average slippage order is greater than or equal to 3%.
Despite its large size, slippage can also occur on Binance. Binance recommends that traders use its OTC (over-the-counter) trading platform to limit slippage. OTC trading refers to purchasing an asset directly from another party instead of via the exchange itself. This is different from the auction market system in which buyers enter competitive bids and sellers submit competitive offers simultaneously.
Binance’s OTC trading option is only available for those buying or selling more than $10,000 USD of crypto assets. Binance says that their OTC platform cuts down on fees and can also execute trades faster. Kraken also has an OTC trading option for larger clients, but this is limited to clients who wish to execute orders of $100,000 or more, limiting it to the largest traders and institutions.
Kraken and Binance do have quite a few similarities. For instance, both exchanges have mobile apps on Android and iOS. Both offer:
In the bullet points below, we’ll provide some of the differences between Binance and Kraken:
Due to the fact that Binance currently does not operate in the United States due to potential regulatory issues, in 2019, Binance opened Binance.US, a more limited trading platform for U.S.-based investors. Like its larger cousin, Binance.US provides staking options, OTC trading, and crypto trading pairs. However, as previously mentioned, Binance.US offers far less currencies than Binance, less than 60, meaning that it has a smaller variety of assets when compared to Kraken. Like Binance, Binance.US does not offer in-person customer service, except for large, institutional clients.
Unlike Kraken, Binance offers P2P (peer-to-peer) crypto trading, in which two individuals directly engage in currency exchanges. P2P trading can potentially offer the lowest trading fees possible but comes with inherent risks. Binance offers a crypto escrow service to ensure that traders act honestly and to prevent P2P trading fraud, which can be rampant without a qualified intermediary. This allows sellers to make sure they receive full payment through the correct channel before confirming the transaction and releasing their assets.
Unlike regular retail transactions, Binance offers 24/7 support for its P2P service. P2P trading vendors also have publicly available reviews and information about their completion rate.
Unlike Kraken, Binance offers a dedicated wallet that traders can use to take their money on and off the Binance platform. According to online reviews, this wallet offers a higher level of speed when used with the Binance platform compared to other wallets. However, it should be noted that the Binance wallet does not offer users full wallet control, and the wallet is the private key owner, not the owner of the wallet. This may be a turn-off for traders and other users who want full control over their assets. The Binance wallet offers a wide degree of features, which can be helpful for advanced users but can be confusing for beginners.
As previously mentioned, both Kraken and Binance offer OTC trading options for larger traders and institutions. In addition, they both offer additional services for these VIP traders.
Kraken says it offers specialized services and high trading volume limits for larger traders and institutions, particularly for family offices, brokers, and high-frequency traders. Kraken’s institutional service also offers more than 100 assets, up from the 70 or so it offers for retail traders.
Similarly, Binance says that it offers one-on-one service, expert advice, and high-volume trading options for high-net-worth individuals with more than $1 million in asset liquidity. Higher volumes will also result in lower fees. Binance also offers asset management services, where assets can be actively traded by Binance employees.
It would be somewhat negligent for us to not compare Kraken and Binance to Coinbase, currently the world’s second-largest exchange by volume. Like Kraken, but unlike Binance, Coinbase is fully available in the United States. Coinbase does not offer quite as many asset options (with 50+ currencies) as either Kraken or Binance.US, and it also has some of the highest trading fees (spreads) of any exchange, with the platform taking 0.50% for most transactions.
However, Coinbase is by far the easiest platform to get started on, making it ideal for both complete beginners and those who want to HODL (hold on for dear life) to crypto on a centralized platform without bothering to keep their assets in an individual wallet. Coinbase is a publicly-traded company with a relatively strong reputation and has only announced one public hack. The hack, which reportedly occurred between March and May 2021, stole assets from approximately 6,000 accounts. The platform says it’s worked with its customers to help fully reimburse them for their lost funds.
As one can see, Kraken and Binance each have a variety of pros and cons for amateur and professional crypto traders alike. For retail traders based in the U.S., Kraken is likely the superior option. Kraken’s responsive customer service also puts it ahead of Binance in many ways.
While Binance’s traditional platform does offer a wider variety of assets, U.S.-based traders can trade more assets on Kraken than on Binance’s U.S.-based platform; Kraken offers around 80 assets while Binance.US offers only around 50.
In addition, the fact that Binance is under investigation in the U.S. means that it could be a riskier option for U.S.-based traders, who could see their assets accidentally frozen, or could even face the sudden shutdown of the entire platform itself in the near future.
If you are not a high-volume trader operating outside the U.S. and don’t need a wide variety of asset options, Kraken may be a good choice. For those outside the U.S., particularly institutional investors, Binance may be a decent option.
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