Cryptocurrency exchange Kraken has announced the closure of its non-fungible token (NFT) marketplace, more than a year after its official launch.
Kraken confirmed in an email to clients that the platform is scheduled to enter the withdrawal-only phase on November 27th. Users have three months to transfer their NFTs before the market is permanently shut down. The exchange indicated that the decision is consistent with efforts to allocate resources to new and developing projects.
A Kraken spokesperson said the closures are part of a broader strategy to prioritize resources towards new products and services currently in development. Kraken currently helps clients transfer NFTs to Kraken wallets or external self-custodial wallets.
Changes in the situation surrounding NFTs and intensifying competition
Kraken's NFT marketplace, which officially launched in June 2023 after a beta testing phase, featured over 250 collections and waived gas fees for buyers and sellers. However, its closure reflects a series of challenges facing the NFT sector.
According to Cointelegraph, citing a report from DappRadar, the NFT market will experience a significant decline in 2024, with trading volume dropping to USD 471 million in August, a 16% decrease from July, and the first transaction This was in sharp contrast to the US$12.6 billion recorded at the highest level. Despite a slight rebound in November, activity remains well below peak levels.
Kraken's marketplace also faced competition from specialized platforms such as OpenSea and Blur. For example, OpenSea's trading volume fell to $110.5 million in August, a 27% month-over-month decline. The NFT sector also faces regulatory uncertainty. In late August, the Securities and Exchange Commission (SEC) issued a Wells Notice to OpenSea indicating possible enforcement action against the collectible tokens.
Kraken itself is under regulatory scrutiny, including ongoing legal proceedings regarding whether certain tokens traded on its platform qualify as securities under the Howey test. It's unclear whether regulatory concerns influenced Kraken's decision, but the lack of clear guidelines regarding NFTs adds to the challenges in the field.
