Bitcoin Margin Trading For US Traders

As a US American trader you can really get frustrated when looking for a Cyptocurrency Margin Broker. All the well-known brokers with high leverage usually already mention an exclusion of US Americans on their homepage, but at least somewhere in the small print in their terms and conditions. Apparently the whole world is allowed to trade with leverage, only residents or citizens of the USA are not.

But why is that and is there really no broker where Americans are allowed to trade with leverage?

Yes, there are – here is the current selection with details of the offers:

At the moment US Americans are allowed to trade cryptocurrencies with leverage on the following cryptocurrency broker platforms.

Cryptocurrency Spot Markets with slight Leverage

Kraken (up to 5x Leverage)

Product: cryptocurrency-to-fait and crypto-to-crypto exchange
Min. Investment: 20 USD
Trading Hours: 24/7
Settlement: Bitcoin or fiat, depending on position
Initial margin: 20%
Sources:

Kraken.com Bitcoin magin trading in the US is available in all U.S. states except New York and Washington, as they don’t hold the required licenses there yet.

The platform is considered the most secure Bitcoin trading site ever. Kraken has been around since 2011 and in all these years there has never been a serious hack where customers have actually lost money.

The management is also considered “real” Bitcoiners, i.e. crypto-currency enthusiasts from the very beginning, who attach importance to remain true to certain principles, which Bitcoin in particular stands for.

Coinbase Pro (up to 3x Leverage)

Product: cryptocurrency-to-fait and crypto-to-crypto exchange
Min. Investment: 0.001 BTC
Trading Hours: 24/7
Settlement:
Initial margin: 33.33%

Coinbase Pro Bitcoin margin trading in the USA is available in 23 states:

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

Regulated (Wall Street) Exchanges for bigger Investors

Then there are the big “traditional” American brokerage platforms, which since 2019 also offer Bitcoin Futures, i.e. special derivatives. First and foremost is the CME Group, the world’s largest derivatives trading platform on Wall Street. CME is primarily aimed at large investors, institutions, simply people with assets. In contrast to Kraken and Coinbase, the underlying asset cannot be bought there. CME only offers CFDs / Futures, i.e. derivatives. In this area there are also Bakkt and Ameritrade, on which Bitcoin Futures can be traded at the following conditions:

CME Group

Product: Monthly BTC Futures contracts
Min. Investment: 5 bitcoin (1 contract unit)
Trading Hours: 5:00 p.m. – 4:00 p.m., Sunday – Friday, Central Time
Settlement: Cash (USD)
Initial margin: ~34%
Sources:

TD Ameritrade

Product: CME Group Monthly BTC Futures contracts
Min. Investment: $25,000
Trading Hours: 5:00 p.m. – 4:00 p.m., Sunday – Friday, Central Time
Settlement: Cash (USD)
Initial margin: 66%
Sources:

On Ameritrade the Bitcoin Futures product of CME Group is available.

Bakkt

Product: Bitcoin (USD) Daily Futures contract | Bitcoin (USD) Monthly Futures contracts
Min. Investment: 1 bitcoin (1 contract unit)
Trading Hours: 8:00 p.m. – 6:00 p.m., Sunday – Friday, EPT
Settlement: Cash (USD) or bitcoin (BTC) at choice
Initial margin: ~ 37%

US Americans must fully verify themselves with all brokers. This means that personal data must be entered correctly and a photo ID must be sent to the trading company.

US Americans will never get around ID verification if they follow the law. “Anonymous” crypto margin trading is not legally permitted for US Americans and is not even possible with the major regulated exchanges.

In order to trade Bitcoin Futures, traders must also submit a separate request. So if you already have an account with Bakkt, Ameritrade or CME, you do not automatically have access to futures trading. To do so, you first need to activate your account for the trading product.

In the following we would like to clarify all questions regarding Bitcoin Margin Trading in the USA:

Why are US Americans not allowed to trade on BitMEX, Bybit, PimeBit and other well-known Brokers with high Leverage?

This question will be addressed below.

First, we will look at the reason why Americans are generally excluded from cryptocurrency margin trading, especially from platforms that offer high leverage. The whole thing has to do with the strict legislation in the US.

The Regulation of Margin Trading in the US

In the USA there is a national supervisory authority that provides the legal framework for leverage trading products, the Commodity Futures Trading Commission (CFTC). This institution was established in the 1970s to regulate the futures and options markets in the USA.

At the same time, there is a second instance that co-operates with the CFTC, the National Futures Association (NFA) which deals in particular with the regulation of derivatives trading in the US. Its tasks include the regulation of futures traded directly on broker platforms as well as Forex and SWAPs trading.

Trading platforms in the USA must be members of the NFA in order to offer their services. Authorisation by the supervisory authority is therefore mandatory. That’s why the big ones are all members, such as Oanda, Forex.com etc.

The authority determines which financial products may be traded and with which leverage.

The CFTC defines the limits of leverage for the various trading products. For example, the limit for retail Forex traders is limited to 50:1 on the main currency pairs. For all other currency pairs, the maximum leverage is 20:1, but we are talking about the “normal” Fiat exchanges.

Cryptocurrencies Classified As Commodities

Cryptocurrencies are now a legally somewhat controversial new branch of financial trading products. Authorities are often even not yet sure how to categorize cryptos. In the US cryptocurrencies are legal, and since 2015 they’ve been classified as a kind of commodity by the CFTC. So far it doesn’t seem an option for the NFA to accept crypto trading brokers as members since cryptocurrencies and digital tokens do not belong to the group of financial products permitted and regulated by the agencies.

Cryptocurrency Brokers in the USA

Crypto trading platforms are accepted in the USA as long as they function as simple exchange platforms (spot market exchanges). This is because ownership – and therefore buying and selling – of Bitcoin and Altcoins is completely legal in the USA. Problems only exist in the area of derivatives trading and trading on margin. It is obvious that trading with leverage is generally a different financial product than simply exchanging one currency for another (spot trading vs. CFD trading), and when it comes to cryptocurrency, this is particularly problematic in the USA due to the circumstances mentioned above.

In any case, it seems that Cryto Brokers are not approved by the above mentioned institutions and therefore at least cannot offer the typical trading with leverage. At least not without the risk of serious legal problems with the USA – Crypto Brokers seem to avoid this for understandable reasons. In the last few years, suddenly there have been signs on all major crypto brokers and exchanges that citizens and residents of the USA are not allowed to use the platform anymore.

Even Poloniex had to strictly ban all US traders from its website since 2019, even though the Bitcoin Broker only provided a small leverage of 2.5x. Since 2019 Poloniex is not a US company anymore. They are now registered in the Seychelles, backed by some unknown Asian investment company. Operating in the US and serving US customers would apparently be too complicated and costly for the company, as for most others.

The registration as such may be permitted at some platforms even for US Americans, but trading will be prohibited / disabled.

Why is there little Leverage on Bitcoin Trades in the USA?

Bitcoin & Altcoin trading with 5x leverage – also in the USA:

Although 100x leveraged Bitcoin margin trades are strictly forbidden for US citizens and residents, a slight leverage of up to 5:1 seems to be somehow feasible depending on the currency pair. At least that’s what we find at Kraken, and the offer is also valid for US-Americans. However, to achieve this, Kraken had to get corresponding licenses from countless authorities in every single US state, which are often quite expensive.

However, since Kraken is a large global used crypto trading platform, they seem to make enough turnover to cover the US American fees. Just in New York and Washington, the regulatory guidelines seem to be beyond the scope so far, so Kraken is not usable there.

Of course, a trading platform with a maximum of 5 times leverage is not a perfect replacement for margin trading brokers like BitMEX or PrimeXBT, but at least you can use 5 times the leverage and they also have certain advanced order settings again, which hadn’t been the case for a long time. In their “Kraken Pro” area the broker offers the same type of advances trading interface as traders are used to from other professional trading sites. Here you find automated trading settings with more complex order types, the order book, your watch list, your positions etc.

Kraken Futures: If you are logged in at Kraken, you will find that the Bitcoin Exchange even offers a separate internal area for professional Bitcoin futures trading with 50x leverage. In this area, a separate, much more professional trading engine with advanced order types is available, as it is common for derivatives trading platform with high leverage. However, these futures are again not available for US Americans.

Why are there so few Trading Platforms for Bitcoin Margin Trading in the USA?

For their moderately leveraged commodities trading products Bitcoin trading companies (spot market exchanges) need very specific licenses from every single US state, and those can be very costly. Kraken holds expensive licenses for their trading products, but this effort is not worthwhile for most other crypto brokers at the moment. Such licenses includes a lot of requirements that Kraken has to comply with. Such requirements may include a high transparency of the company’s operations in general, their managemet, user transactions as well as the mentioned fees.

Maybe a ray of hope: Cex.io is planning to offer its own separate margin trading platform, which will include at least 10:1 leverage on BTC and ETH (derivative trading against USD). However, it is not clear whether the offer will include Americans or not. Logically, it is unlikely that this will be the case. It remains to be seen. But if there were a legal way to suddenly offer 10 x leverage with Bitcoin margin trading in the US, others would be planning the same. At the moment the derivatives broker area of Cex.io is in beta mode, and has been for some time. The development of this area seems to be very slow.

What about Binance.us?

In 2019, one of the world’s largest crypto brokers, Binance, launched its own trading platform especially for US Americans: Binance.us. Americans who want to use Binance should therefore register explicitly for the separate domain and use it only.

This separation from the US market and the rest of the world makes it easier for Binance to offer its users only those trading services that are permitted in their country. Of course, Binance.us does not have margin trading. However, the platform allegedly plans to introduce margin trading as soon as possible, as far as we have heard. When this will happen and what exactly this means, how much leverage etc. must bide our time.

Suspected Unreported Number of US Traders on High Leverage Margin Broker Platforms

You’ve probably heard that some American traders are suspected to still be using prohibited brokers by making use of a VPN. BitMEX and other 100x leverage brokers strictly ban traders from the United States, but by using IP addresses from allowed countries people from the US can potentially still use the prohibited platform and make sure not to get caught.

In general, through a VPN, one can use an IP address from another country to access a banned website. From a technical point of view, for the website it looks like the user is in this other country. Even the internet service provider of the vpn user doesn’t get any data about what websites the user has visited as the entire data connection is encrypted and only leads to the vpn server. This technology is suspected to be used quite frequently at crypto brokers, who normally do not require ID verification.

That’s where we want to strongly emphasis this point again: It is prohibited to register with Margin Brokers under false information. So you should definitely not use this technical ploy to do something illegal.

We hope that this article has shed some light on why Americans are not (yet) allowed to trade cryptocurrencies with higher leverage. Hopefully this will change in the next few years.