Bitcoin & Crypto Margin Trading In The USA

Risks of unauthorized Margin Trading through VPN

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

Nearly all known brokers of the scene have noted an explicit exclusion of residents and citizens of the USA in their terms and conditions.

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

Many know this, but nevertheless use the platforms by activating a VPN in advance to log in with a foreign IP. In this case, however, these traders accept the risk that the trading platform could ask for an ID at any time and they would then have to come out as Americans.

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

All this is very questionable – that adult people in the country of supposedly unlimited possibilities are that much restricted in their freedom of action. And that on a subject that doesn’t seem to be a problem for the rest of the world. In most countries of the world adults are allowed to register without problems with cryptocurrency brokers to trade with each other.

Only in the USA are the hands of their own citizens tied as if they were small children who cannot decide for themselves. Bitcoin margin trading possibilities in the US are hard to find, but the simple purchase and sale of any cryptocurrency without leverage is allowed. Which doesn’t really make sense and arises questions. And above all the question: isn’t there any broker who grants US citizens leverage in Bitcoin trading?

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 Derivatives trading platforms.

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. Therefore a permission of the brokers is not possible so far. 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.

Crypto Margin Trading Platforms in the USA

However, it is not the case that cryptocurrency margin trading is entirely excluded in the USA. With some of the trading platforms available for Americans there is at least a slight leverage effect.

So if you don’t want to take any risks and prefer to trade Bitcoin and altcoins with leverage legally, you can do so with the following platforms:

Kraken – Bitcoin & Altcoin Margin Trading in the US!

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.

One of the best Bitcoin Trading Platforms in so many Ways

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.

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.

Resources:

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

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