Payward, the corporate entity behind the well‑known cryptocurrency brokerage platform Kraken, has announced an ambitious plan to bring on‑chain perpetual futures to its U.S. client base by leveraging the Hyperliquid protocol.
This move follows Payward’s recent $550 million acquisition of Bitnomial, a U.S.‑based digital asset exchange that already holds a suite of regulatory approvals and a robust technology stack. By integrating Bitnomial’s licensed infrastructure with the decentralized, high‑performance capabilities of Hyperliquid, Payward aims to become the first U.S.‑registered exchange to offer fully on‑chain perpetual futures contracts, a product class that has traditionally been confined to centralized platforms or offshore jurisdictions. ### Background: Payward, Kraken, and the Bitnomial Deal Payward has long been a major player in the global crypto‑trading arena, primarily through its flagship brand Kraken, which serves millions of users across more than 100 countries. In recent years, the company has pursued a dual strategy of expanding its product suite while simultaneously strengthening its compliance posture in key markets, especially the United States.
The acquisition of Bitnomial in early 2024 was a decisive step in that direction. Bitnomial, founded in 2019, secured a Series 2 license from the U.S. Commodity Futures Trading Commission (CFTC) and a Money Services Business (MSB) registration with FinCEN, enabling it to legally offer futures, options, and other derivatives to U.S.
residents. The $550 million purchase price reflected both the intrinsic value of Bitnomial’s technology platform and the strategic advantage of acquiring an already‑regulated entity. Payward has indicated that the integration will be phased, with Bitnomial’s compliance framework serving as the backbone for any new derivative products that the combined organization launches in the United States. This regulatory scaffolding is crucial because perpetual futures—contracts that have no expiry date and are settled continuously via funding rates—are subject to stringent oversight due to their leverage and price‑impact characteristics.
### Why Hyperliquid? Hyperliquid is a relatively new blockchain protocol designed specifically for high‑throughput, low‑latency trading of crypto derivatives.
Unlike traditional layer‑1 chains that prioritize decentralization at the expense of speed, Hyperliquid adopts a hybrid architecture that combines a permissioned consensus layer with a public settlement layer. This design enables sub‑second transaction finality, a feature that is essential for perpetual futures where funding rates must be calculated and applied every few hours to keep contract prices aligned with underlying spot markets.
Payward’s decision to partner with Hyperliquid stems from several technical and strategic considerations: 1. **Scalability** – Hyperliquid can process millions of transactions per day without the congestion that plagues many existing blockchains. This capacity ensures that large order books can be maintained without slippage or latency. 2.
**Security** – The protocol employs zk‑rollups and other zero‑knowledge proofs to guarantee that trade data is both private and tamper‑proof, addressing regulatory concerns around market manipulation. 3. **Interoperability** – Hyperliquid is built to be compatible with existing DeFi infrastructure, allowing seamless bridging of assets from Ethereum, Solana, and other ecosystems into its native environment. 4.
**Regulatory Alignment** – Because Hyperliquid’s settlement layer is public and auditable, it provides regulators with a transparent ledger of all trades, facilitating compliance reporting and auditability. ### The Product: On‑Chain Perpetual Futures Perpetual futures are derivative contracts that allow traders to speculate on the price movement of an underlying asset—such as Bitcoin, Ethereum, or a basket of altcoins—without ever owning the asset outright. The contracts are “perpetual” because they never expire; instead, they employ a funding rate mechanism that periodically transfers small amounts of collateral between long and short positions to keep the contract price anchored to the spot market. By moving these contracts on‑chain, Payward intends to achieve several benefits: - **Transparency** – Every trade, funding payment, and liquidation event will be recorded immutably on the Hyperliquid blockchain, giving users and regulators a clear view of market activity.
- **Reduced Counterparty Risk** – Traditional centralized futures exchanges hold users’ collateral in a custodial wallet, exposing them to the risk of internal mismanagement or hacking. On‑chain contracts lock collateral in smart contracts that execute automatically based on pre‑defined rules. - **Improved Accessibility** – U.S.
traders will be able to access perpetual futures without needing to route their orders through offshore entities, simplifying tax reporting and compliance. - **Innovative Features** – The programmable nature of smart contracts opens the door to novel funding mechanisms, dynamic leverage adjustments, and automated risk‑management tools that can be tailored to individual user preferences. ### Regulatory Landscape and Compliance Launching on‑chain derivatives in the United States is not a trivial undertaking.
The CFTC classifies perpetual futures as “swap” products, which fall under the jurisdiction of the Commodity Exchange Act (CEA). To operate legally, an exchange must register as a designated contract market (DCM) or a designated futures clearing organization (DFCO). Payward’s acquisition of Bitnomial provides an existing DCM registration, which can be leveraged for the new product line.
In addition to CFTC registration, Payward will need to adhere to the Securities and Exchange Commission (SEC) guidelines if any of the underlying assets are deemed securities, as well as comply with the Office of Foreign Assets Control (OFAC) sanctions list. The on‑chain nature of the contracts adds an extra layer of scrutiny, as regulators will likely demand robust AML/KYC procedures, real‑time transaction monitoring, and comprehensive reporting of large positions. Payward has publicly committed to working closely with the CFTC, the SEC, and other relevant authorities throughout the development and rollout phases.
The company plans to submit detailed technical whitepapers, risk‑management frameworks, and audit reports to demonstrate that its Hyperliquid‑based system meets or exceeds all regulatory standards. ### Market Impact and Future Outlook If successful, Payward’s on‑chain perpetual futures could set a new benchmark for how regulated crypto derivatives are offered in the United States. Competitors such as CME Group, Binance US, and FTX (if it re‑emerges) have all expressed interest in blockchain‑based derivatives, but none have yet combined full regulatory registration with a truly on‑chain settlement layer. The introduction of these products is likely to attract a broader segment of institutional and retail traders who have been hesitant to engage with offshore platforms due to legal uncertainty.
Moreover, the transparency and security guarantees of Hyperliquid could foster greater trust among investors, potentially increasing overall market liquidity and price discovery efficiency. Looking ahead, Payward may expand the Hyperliquid offering beyond perpetual futures to include options, variance swaps, and even tokenized indices.
The modular nature of smart contracts means that new derivative structures can be prototyped and deployed rapidly, allowing the exchange to stay ahead of market demand. In summary, Payward’s strategic use of the Bitnomial acquisition and the Hyperliquid protocol positions it to become the pioneer of regulated, on‑chain perpetual futures for U.S. clients.
By marrying regulatory compliance with cutting‑edge blockchain technology, the company aims to deliver a product that is transparent, secure, and accessible—potentially reshaping the landscape of crypto derivatives trading in the United States.