Kraken Possibly Building a HIP-3 Compliant Decentralized Exchange Using Hyperliquid Technology
A deployer known as Kraken on the Hyperliquid testnet has approved ten wallets for testing purposes and has evaluated three out of five compliance controls. This suggests that the centralized exchange may be considering a permissioned HIP-3 market.
Summary
- Ten wallets have been successfully granted approval for the test deployment through a gating mechanism.
- Three out of five compliance controls under evaluation have been implemented, including mandatory position reductions and collateral transfers.
- Kraken has yet to publicly confirm its ownership or engagement in the testnet deployment.
- HIP-3 allows external developers to establish perpetual markets utilizing Hyperliquid’s trading framework.
On August 22, Blockworks analyst Shaunda Devens reported that a deployer termed “Kraken HIP-3 test DEX” initiated a permissions system named Star Gating on Hyperliquid’s testnet starting August 19.
This deployment has successfully added ten wallets to its approved-user list and has efficiently assessed three of the five compliance controls mentioned on the testnet, according to Devens. Additionally, a validator has been registered under the identifier “Kraken Exchange Validator.”
Unverified Connection Between Kraken and HIP-3 Test
According to Devens, Hyperliquid has been upgrading testnet functionalities that might aid regulated or licensed participants. In addition to wallet whitelisting, the observed functions enable a deployer to cancel users’ open orders, execute position closures through reduce-only orders, and manage collateral transfers.
Unlike standard user-initiated trades, each action grants the deployer direct oversight of an account or position. This arrangement allows an operator to employ these capabilities to restrict access, comply with sanctions or legal stipulations, mitigate risk, and withdraw funds from an account as necessary.
Such practices are commonplace in centralized exchanges, where account access is contingent on identity verification and compliance measures. Their implementation in HIP-3 could foster a permissioned market while still leveraging Hyperliquid’s on-chain order book and settlement infrastructure.
In her analysis, Devens speculated whether Kraken could emerge as “the first compliant HIP-3 deployer,” though she emphasized that merely invoking the name does not substantiate Kraken’s connection. Hyperliquid’s testnet allows for permissionless deployments, meaning any unrelated user could create a market or validator under the exchange’s branding.
As of the time of this report, neither Kraken nor Hyperliquid has publicly acknowledged any collaboration or testing. Current evidence suggests a Kraken-branded deployment utilizing the new controls but does not confirm Kraken as the developer.
Understanding the HIP-3 Framework by Hyperliquid
HIP-3, or Hyperliquid Improvement Proposal 3, enables independent developers to run perpetual futures markets utilizing HyperCore, the network’s trading engine. HyperCore provides the order book, matching system, margin functionalities, and liquidation processes, while each deployer establishes their market rules and trading conditions.
Previous reports from crypto.news indicated that HIP-3 was launched on the mainnet on October 13, 2025. To operate an independent perpetual exchange without needing approval from Hyperliquid’s core team, a builder must stake 500,000 HYPE.
Deployers have the latitude to define listed assets, price oracles, collateral requirements, margin standards, leverage limits, and funding conditions. The first three assets can be listed without an auction; however, any additional assets require a Dutch auction among deployers.
The 500,000 HYPE staking requirement serves as a financial security deposit. Validators can levy penalties on this stake if a deployer violates oracle usage rules or market regulations, with this requirement enforced for 30 days following the operator’s market closure.
Markets established under HIP-3 allow the deployer to retain 50% of the fees accrued. A report from July 3 noted that open interest in HIP-3 exceeded $1.43 billion, with contracts linked to equities and commodities accounting for seven of Hyperliquid’s top ten markets by trading volume.
These permissioned features may significantly reshape this model. While anyone can deploy a HIP-3 market by fulfilling protocol requirements, a deployer using Star Gating could limit trading on their market to authorized wallets.
This setup would enable an operator to integrate public blockchain settlement with identity verification, location restrictions, or other account-specific regulations. It remains uncertain whether such features will be available on the mainnet and under which conditions.
Kraken’s Movement into Regulated and Blockchain Markets
The name associated with the testnet has garnered attention, particularly as Kraken and its parent company, Payward, have been progressing throughout 2026 to blend securities, tokenized assets, and on-chain trading solutions.
On August 18, the exchange began trading U.S. stocks for eligible clients within the European Economic Area. This service includes over 7,000 traditional U.S.-listed stocks, around 700 xStocks, and more than 600 crypto assets, all available through a single account.
Offering traditional stock services is Payward Europe Digital Solutions, an investment firm based in Cyprus, licensed under the EU’s MiFID II regulations. Kraken reported that xStocks have generated over $38 billion in transaction volume since the launch of these tokenized products in June 2025.
Earlier in 2026, the firm introduced xChange, an on-chain execution system that initially supported over 70 tokenized equities across Ethereum and Solana. Subsequently, Kraken allowed eligible clients outside the U.S. to utilize select xStocks as collateral for futures and margin positions.
Payward is also aiming to expand its offerings beyond U.S. equities. After a July agreement with trading infrastructure company GTN, it plans to include shares from Hong Kong, eventually extending to the UK, Europe, South Korea, and other regulated markets, contingent on local regulations.
Devens pointed out Hyperliquid’s initiatives involving xStocks and Payward’s recent activities as possible indicators of a connection to Kraken in the testing phase. Nevertheless, her evaluation remains speculative, based primarily on names and timelines rather than confirmed data from either entity.
U.S. Derivative Regulations May Restrict Access
For users in the U.S., having a permissioned HIP-3 deployment does not inherently grant legal access to on-chain perpetual contracts. Typically, commodity derivatives offered to American retail investors must be provided by entities registered with the Commodity Futures Trading Commission.
