Bitcoin & Crypto Margin Trading In The USA

Contents

In the USA trading of CFDs is generally prohibited. US American assets, indices etc. can be traded on many derivative platforms with leverage, but this never applies to US citizens and residents of the USA.

As a rule, brokers who offer US derivatives have their headquarters outside the USA and are licensed in the UK by the FCA, for example, or by other leading supervisory authorities in other countries.

US Americans can make regular investments in stocks and other assets, but they cannot participate in pure price bets with high leverage on assets.

In the United States, cryptocurrencies are legal in themselves, so they may be bought and sold in the same way as shares and other assets. A 1:1 exchange of money for cryptocurrencies or crypto for crypto is allowed. What is not allowed are CFDs, i.e. trading products where the underlying asset is not moved. CFDs are usually traded with high leverage. Well-known platforms that offer cryptocurrency CFDs with high leverage are BitMEX, PrimeXBT or Bybit – all of which are therefore of course prohibited in the USA. The ban does not only affect the USA as a territory, but also US citizens living outside the country are affected by the exclusion.

There is nevertheless a way to trade Crypto with Leverage in the United States of America

Crypto Margin Trading Platforms in the USA

This does not mean, however, that it is not possible to trade crypto currencies with slightly increased profit potential in the USA. There are a few platforms that have the appropriate licenses to offer crypto trade with a slight leverage in the US, at least in a part of the US. On these platforms, the underlying asset, especially Bitcoin, is physically traded despite a certain amount of leverage offered. So they are not CFDs, but actual Bitcoin purchases and sales.

#1: Kraken.com – Crypto Exchange & Margin Broker

Bitcoin & Altcoin Margin Trading in the US – up to 5x Leverage

Bitcoin margin trading U.S.
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At the moment the list is short – only this one exchange – but Kraken is one of the most well known and trusted Bitcoin trading platforms in the world.

Kraken is a very experienced crypto trading company based in the USA (California), the pure cryptocurrency trading platform was founded already in July 2011, making Kraken.com one of the oldest exchanges. The platform is one of the most secure in the cryptocurrency exchange and brokerage business – it has never actually been hacked!

New York and Washington excluded

Unfortunately Kraken is not allowed to offer its services to all US traders without exception, but at least to most. Excluded from trading on Kraken are residents of New York State and Washington State.

Highest Security Level

What many do not know: The founders of Kraken ran a beta test version of the platform for 2 full years before it went live. The highest security standards in this industry are the founders’ highest law.

Kraken represents the original Bitcoin Philosophy

Furthermore, Kraken’s founders represent the techno-anarchistic philosophy with all their heart. When Kraken was initially operating in New York until 2015, a court ruled that the cryptocurrency exchange should disclose all user data in order to obtain a broker license for the state of New York. This regulation was to apply generally to cryptocurrency exchanges in New York. But this is exactly what contradicts the principles of true crypto enthusiasts, and Kraken remained true to his principles. The business in the state of New York was simply better abandoned than to disclose confidential data to the authorities.

“One of the best Bitcoin Trading Platforms in so many Ways”

Kraken Bitcoin & Altcoin Trading Products

Kraken is one of the big international cryptocurrency exchanges where Bitcoin and a whole range of altcoins can be bought and sold for Fiat money. The company hasn’t been offering small leverage trading for too long, but it shows that crypto margin trading in the USA seems to be within the bounds of possibilities, at least in certain states.

  • Bitcoin (XBT) against USD and EUR
  • Ethereum against Bitcoin (ETH/XBT)

Also many Altcoins can be traded against Bitcoin, USD, EUR or ETH:

ADA, ALGO, ATOM, BAT, BCH, CAD, CHF, DAI, DASH, EOS, ETC, GNO, ICX, JPY, LINK, LSK, LTC, MLN, NANO, OMG, PAXG, QTUM, REP, SC, TRX, USDC, USDT, WAVES, SDG, XLM, XMR, XRP, XTZ, ZEC

Leverage 1:5

All trading pairs can be leveraged with up to 5x which allows decent profit margins.

Kraken also offers Futures (Bitcoin, Litecoin, Ethereum, Ripple and Bitcoin Cash paired with USD, Ripple als with XBT) with up to 50x leverage. Unfortunately those higher leveraged trading products are again not allowed for US traders and a range of other jurisdictions. So keep in mind that Kraken’s Futures trading area is not for you if you are from the US :(.

But the main trading platform of Kraken with 1:5 leverage in the advances trading area is highly recommended for US margin traders as here you are supporting one of the best bitcoin exchanges ever in so many ways.

Kraken Trading Fees

Kraken has a typical maker-taker fee model, fees range from 0 to 0.26 %.

Important to know for Bitcoin Margin Traders in the USA: US traders are not allowed to hold open positions with Kraken for more than 28 days. If you don’t close such a position yourself in time, Kraken has to automatically liquidate your position at the end of the 28th day, likely even without notice. Position traders must keep an eye on this.

We hope that it will only be a matter of time before other platforms offer leveraged Bitcoin trading for traders from the USA, at least with an equal leverage of 1:5. But no one knows. Luckily there is at least Kraken who don’t let us down.

#2: Pro.Coinbase.com – The Coinbase Margin Broker Platform

crypto margin trading USA
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Coinbase is one of the big Spot Market exchanges in the USA where Bitcoin and some big altcoins can be bought and sold. The trading company operates 2 separate platforms for different trading activities.

On the main page Coinbase.com Bitcoin and altcoins can be bought and sold against USD (and other currencies). The Coinbase Pro platform is a separate website aimed at traders who want to trade cryptocurrencies for profit and who prefer an advanced trading environment.

Leverage 1:3

One of the advanced trading features the Coinbase Pro platform has to offer is a slight leverage. The platform offers leverage of up to 1:3 for selected traders. This will probably have to be requested and activated.

Coinbase – the main site of the company – can be used in all US states, but there are restrictions for the usability of certain services depending on the US state, because Coinbase holds a separate license for each state. However, not all of them include the participation in Money Transmission, so the USD Wallet is not available in some states. Read more about this here.

Coinbase Pro supports about 30 cryptocurrencies. However, there are very different conditions. While some can be bought, others can only receive and send.

Margin Trading only usable in 23 States of the USA

However, margin trading with 3x leverage can only be made available to selected traders from 23 US states. For licensing reasons Coinbase Pro can therefore only be used in the following states:

Wyoming, Texas, Maine, Illinois, Utah, New Jersey, Oklahoma, Arizona, Massachusetts, Arkansas, Nebraska, Georgia, New Hampshire, West Virginia, Florida, Kansas, North Carolina, Connecticut, Colorado, Oregon, Virginia, Wisconsin, South Carolina.

Risks of unauthorized Margin Trading through VPN

Countless US traders face the same problem: Where can citizens of the United States of America trade cryptocurrencies with leverage?

Nearly all known brokers in the scene have stated in their terms and conditions an explicit exclusion of residents and citizens of the United States of America.

As an American, you usually get a notice that the service is not allowed in that country when you try to register with crypto-margin trading brokers. Many trading platforms automatically issue this notice if the website visitor has a US IP and tries to register.

Technically it is possible to circumvent such a restriction by using a VPN, i.e. an IP from another country. However, this is not advisable at all, because it is a clear violation of the law and if it is discovered, you will have a problem. It could be discovered if the platform requires an ID verification and you have to reveal your US American identity.

The platform can then freeze the user’s account and funds. We don’t know exactly what other sanctions could happen, but if the trading account and the funds on it were frozen, it would certainly be an extreme inconvenience.

Financial Trading Regulations in the United States

leveraged crypto trading in the usaFirst of all, one has to know the background of the US American regulations in the area of trading with financial products and derivatives. The US have their own system here. In principle, there are two regulators in the States that regulate foreign exchange trading. First of all that would be the CFT – Commodity Futures Trading Commission¹. This institution has been in existence since the 1970s with the mandate to oversee the options and futures markets.

Parallel to the CFT, there is also the NFA – National Futures Association² – which is responsible in particular for derivatives trading. To a certain extent, both authorities work together. The NFA sets the rules for Forex, Futures and SWAP trading and decides which derivatives may be traded with which leverage. Here the maximum leverage for Forex, Futures and all other Derivatives is determined.

Every broker who wishes to operate officially in the USA must be a member of the National Futures Association. This is exactly the case with the large traditional Forex and Stock trading platforms. As mentioned earlier above, CFDs (Contracts for Difference) are entirely prohibited in the USA at the moment.

Regulations related to Crypto Margin Trading in the USA

In the United States, cryptocurrencies are completely legal and can therefore be bought and sold. Unlike in Japan, where Bitcoin is an official currency, cryptocurrencies are classified as commodities in the USA. The only cryptocurrency allowed in the form of futures derivatives is Bitcoin. The crypto reserve currency (Bitcoin –> BTC) is therefore traded on the American stock exchange – one of the largest platforms is CME Group³, for instance.

However, this admission only affects Bitcoin and only a specific trading product (Bitcoin Futures Derivatives). All known cryptocurrency derivative brokers offer margin trading products that are not yet licensed in the USA. For this reason, it is not yet possible for such companies to be licensed and permitted in the US. In this case we are talking about the well-known international Bitcoin brokers like BitMEX, Bybit, PrimeXBT, PrimeBit and a number of other Bitcoin margin trading providers.

The whole regulation thing in the USA is even still a little bit more complicated, since the individual states all still have their own laws concerning financial services etc..

To cut a long story short, the cryptocurrency brokers have no chance to legally offer their services to US citizens at the moment. This even applies to US citizens who do not live in the USA.

This situation is likely to continue for the foreseeable future. We are not aware of any indications that this legal situation for Bitcoin Margin Trading in the USA will change soon.

Frequently asked Questions about Crypto Margin Trading in the USA

What are the best crypto exchanges for margin trading in the USA?

Where to do margin trading for U.S. citizens is a common question people often ask as the U.S. cryptocurrency trading market is huge and people are again and again confused why they are excluded from trading on platforms like BitMEX and similar ones. That’s why we’ve answered this question in detail in earlier paragraphs above on this page. But to make a long story short – US Americans can only trade cryptocurrency with leverage on Kraken. This leverage is limited to a maximum of 1:5.

Who has the highest cryptocurrency margin trading in the USA?

As we have already explained in detail above on this page, there is hardly any crypto margin trading available in the USA. US citizens are even excluded from crypto margin trading platforms when living abroad. However, there is a crypto trading platform that has achieved the right in nearly all US states to offer crypto trading with a slight leverage to their US customers. This platform ist Kraken, with a 5x leverage for Bitcoin and altcoin trading. So if you’re wondering how to use leverage bitcoin trading in the USA, Kraken is the place to go.

When is Margin Trading coming to the USA?

Maybe never, nobody knows. There is at least no indication that margin trading will be allowed in the USA in the future. Margin trading always refers to CFDs and CFD trading is prohibited in the USA.

How to do taxes when margin trading in the USA?

This is a tricky question and the answer refers to 2 separate issues. On one hand you are not allowed to trade on margin in the USA or as a US citizen in general. However, you have to pay taxes on any extra income, even if it might result from illicit trading activities. If your trading activities and especially cash outs of profits get obvious in your bank statement, then you should mention that income on your tax return otherwise you risk a charge of tax evasion or tax fraud. If the IRS requires documentation, you may be required to disclose your margin trading activities on a platform prohibited to US citizens. There are likely severe penalties for this. Best would likely be to consult a professional tax advisor / legal advisor if you’re affected by this matter.

How to trade on margin with Kraken?

Kraken is a Bitcoin and altcoin trading platform where you can register without ID verification as long as you only want to make crypto deposits and withdrawals. As soon as you want to be able to cash out your trading profits in fiat money to your bank account, you need to verify your identity by photo ID. When logged in you fist need to deposit your trading capital under “Funding” in the top menu. Once finished your deposit you can start trading – you will find the margin trading option under “Trade” in the top menu. In this Trade section you can set your buy or sell orders and define the leverage in a separate field. Everything is quite self-explanatory. Once you’ve sent your order you will find it as an open position in your “Positions” area. There you watch the Profit or Loss state of your position in real time. Depending on your trading order setting your positions might get closed if you’ve set a conditional close to your order or you have to close it manually when your target is reached. For leveraged positions it is recommended to always use a stop loss order without exception.

How long can margin positions remain open on Kraken?

For US traders Kraken has to follow other rules than for traders from other countries due to US law. US traders are only allowed to keep positions open for a maximum of 28 days, after the that period positions of US traders will be liquidated automatically. The rest of the world can keep positions open for as long as 365 days. So if you are from the US, unfortunately, you aren’t allowed to hold long term positions.

How much do you have to have in your account to margin trade on Kraken?

You can start with very little stake, but the exact amount depends on the currency. In the case of BTC it’s as little as 0.002 BTC, for ETH it’s 0.02 ETH. However, if you want to deposit fiat money, the minimum deposit defer a lot: 20 USD, 20 CAD, 150 GBP, 1 EUR and 15,000 JPY are the minimum deposits you can make by bank transfer or other fiat deposit options. So this is something you need to bare in mind. Those fiat money minimum deposits have nothing to do with the minimum positions you can open after funding your account. For instance, you don’t need to use all your 150 GBP for a positions etc.

How much does Kraken charge for margin?

Kraken charges 2 types of trading fees: A position opening fee and a rollover fee. The latter occurs for positions that are held for more than 4 hours. The hight of the fees depends on the currencies you’re trading and the quote currency. E.g. XBT traded against USD or EUR will be 0.01% position opening fee and 0.01% per 4 hours. So 16 hours would be 0.04%, for instance. All Bitcoin (XBT) traded against CAD, GBP or USDT costs double: 0.02% opening fee and 0.02% per 4 hours. A complete list of Kraken’s fees for trading cryptocurrencies can be found here: https://support.kraken.com/hc/en-us/articles/206161568-What-are-the-fees-opening-and-rollover-for-margin-trading-

How to pay back margin on Kraken?

Paying back the margin of a position on Kraken means to settle the position. This can be done in the “Advanced” trading section (“Trade” -> “New Order” -> “Advanced”) where you have to place a buy or sell order depending on whether you want to settle a long or a short position. Here you need to define the “Volume” and choose order type “Settle Position”. Such a settling order has to be in the same currencies as your opening order.

Which cryptocurrencies have margin on Kraken?

On Kraken you can trade the following cryptocurrencies on margin: XBT (Bitcoin), TRX (Tron), XTZ (Tezos), XMR (Monero), LTC (Litecoin), ETC (Ethereum Classic), ETH (Ethereum), EOS, DASH, LINK, ADA (Cardano), BCH (Bitcoin Cash) and REP (Augur).

How good is Kraken for trading?

For our taste Kraken is a good trading platform due their clean and easy to understand interface, their advanced trading options and the many years of experience of the company. Kraken not only is one of the oldest Bitcoin and altcoin trading platforms, they also still count as the most secure and most trusted crypto exchange worldwide. Their Futures trading platform with 50x leverage even works similar to other popular Bitcoin CFD margin brokers, however, Kraken Futures are unfortunately not available in the USA or for US citizens in general, due to US law.

Resources:

¹https://www.cftc.gov/IndustryOversight/TradingOrganizations/index.htm
²https://www.nfa.futures.org/about/index.html
³https://www.cmegroup.com