Possible Testing of a Compliant HIP-3 Decentralized Exchange by Kraken on Hyperliquid Platform
A deployer on the Hyperliquid testnet utilizing Kraken’s name has whitelisted ten wallets and conducted tests on three compliance controls, suggesting that the centralized exchange might be exploring a permissioned HIP-3 market.
Summary
- Ten wallets have been authorized for the test deployment through a gating mechanism.
- Three of the five compliance controls under observation have been executed, including enforced position reductions and collateral transfers.
- Kraken has yet to confirm any ownership or operational involvement in the testnet deployment.
- HIP-3 permits external developers to run perpetual markets via Hyperliquid’s trading infrastructure.
Blockworks analyst Shaunda Devens reported on August 22 that a deployer named “Kraken HIP-3 test DEX” activated a permission system known as Star Gating on Hyperliquid’s testnet on August 19.
The deployment has added ten wallets to its approved-user list and tested three out of five compliance controls noted on the testnet, as mentioned by Devens. A validator has also been registered under the designation “Kraken Exchange Validator.”
Kraken’s connection to the HIP-3 test remains unverified
Devens indicated that Hyperliquid has been enhancing testnet capabilities that could assist regulated or licensed operators. Alongside wallet whitelisting, the functional tools observed allow a deployer to cancel a user’s open orders, execute position closures via reduce-only orders, and transfer collateral.
Unlike typical user-initiated trades, each action provides the deployer with direct control over an account or position. This means an operator could leverage these functions to limit access, respond to sanctions or legal requests, manage risk, and withdraw funds from an account when necessary.
Such controls are typical in centralized exchanges, where account access is contingent upon identity verification and compliance checks. Implementing them within HIP-3 would foster a permissioned market, still utilizing Hyperliquid’s on-chain order book and settlement system.
In her analysis, Devens raised the question of whether Kraken could become “the first compliant HIP-3 deployer,” while also emphasizing that the mere mention of the name does not confirm Kraken’s involvement. Hyperliquid’s testnet permits permissionless deployments, which implies that any unrelated user could establish a market or validator under the exchange’s name.
As of the time this report was composed, neither Kraken nor Hyperliquid had publicly confirmed any partnership or testing. The evidence thus far indicates the existence of a Kraken-branded deployment using the new controls rather than confirming Kraken as its creator.
Understanding Hyperliquid’s HIP-3 framework
HIP-3, short for Hyperliquid Improvement Proposal 3, empowers independent developers to operate perpetual futures markets using HyperCore, the network’s trading engine. HyperCore provides the order book, matching system, margin features, and liquidation processes, while each deployer defines their own markets and trading rules.
As reported previously by crypto.news, HIP-3 became operational on the mainnet on October 13, 2025. To run an autonomous perpetual exchange without Hyperliquid’s main team’s approval, a builder must stake 500,000 HYPE.
Deployers choose the assets listed, price oracles, collateral, margin conditions, leverage limits, and funding parameters. The first three assets can be introduced without an auction, while subsequent listings necessitate a Dutch auction among deployers.
The 500,000 HYPE stake acts as a financial security deposit. Validators can penalize this amount if a deployer manipulates an oracle or violates market rules, with the requirement enforced for 30 days post the operator’s market closure.
HIP-3 deployers are entitled to 50% of the fees generated by their markets. A report dated July 3 indicated that HIP-3 open interest surpassed $1.43 billion, with contracts linked to equities and commodities comprising seven of Hyperliquid’s ten largest markets by trading volume.
Permissioned functions could alter a key aspect of this model. While any individual could deploy a HIP-3 market once the protocol requirements are met, a deployer utilizing Star Gating could restrict trading on their market to authorized wallets.
This setup would enable an operator to merge public blockchain settlement with identity verification, geographical limitations, or other account-level regulations. The confirmation of whether these functionalities will be available on the mainnet, and under what conditions, remains pending.
Kraken’s expansion into regulated and on-chain markets
The testnet’s name has garnered attention partly because Kraken and its parent firm, Payward, have been working through 2026 to incorporate securities, tokenized assets, and on-chain trading services.
On August 18, the exchange launched U.S. stock trading for eligible customers across the European Economic Area. This service encompasses over 7,000 traditional U.S.-listed stocks, upwards of 700 xStocks, and more than 600 crypto assets accessible via a single account.
Providing the conventional stock service is Payward Europe Digital Solutions, a Cyprus investment firm authorized under the EU’s MiFID II regulations. Kraken reported that xStocks had accumulated over $38 billion in transaction volume since the tokenized products were launched in June 2025.
Earlier in 2026, the company introduced xChange, an on-chain execution system initially supporting over 70 tokenized equities across Ethereum and Solana. Kraken subsequently allowed eligible customers outside the U.S. to utilize selected xStocks as collateral for futures and margin positions.
Payward is also working on expanding the product beyond U.S. equities. Following a July agreement with trading infrastructure firm GTN, it intends to include shares from Hong Kong before branching into the United Kingdom, Europe, South Korea, and other licensed markets, subject to local regulations.
Devens referenced Hyperliquid’s initiatives involving xStocks and Payward’s recent business movements as factors suggesting a possible link to Kraken in the test. However, her assessment remains speculative based on names and timelines rather than confirmation from either entity.
U.S. derivatives regulations could still limit access
For U.S. users, a permissioned HIP-3 deployment alone would not render on-chain perpetual contracts legally available. Generally, commodity derivatives aimed at American retail traders need to be provided by entities registered with the Commodity Futures Trading Commission (CFTC).
An August 3 review of the CFTC’s oversight of cryptocurrency indicated that regulated crypto derivatives venues in the U.S. function through designated contract markets, clearing organizations, and registered intermediaries. In May 2026, the agency sanctioned the listing of a Bitcoin perpetual futures contract on a registered exchange and provided guidance regarding continuous trading, clearing, and settlement.
The CFTC has also targeted offshore derivatives platforms that served U.S. users without proper registration. Order controls and wallet screening could assist an operator in enforcing geographical restrictions, but such functionalities do not negate the need for registration or compliance with other legalities.
Risk controls are also critical since HIP-3 deployers determine their own price sources and market parameters. For instance, on July 28, a Hyperliquid contract associated with SK Hynix shares plummeted by 17.9% intraday due to a single unusually low trade on South Korea’s NextTrade, which was integrated into the contract’s oracle system.
This contract was managed by Trade.xyz under HIP-3. One share traded at 1.272 million won, 29.96% lower than the preceding close, before the underlying price rebounded from that isolated transaction. HyperInsight documented that the on-chain contract dropped from approximately $1,128 to $927 before later climbing back above $1,100.
Trade.xyz was responsible for the oracle, leverage rules, and settlement procedures, while Hyperliquid’s documentation allowed the deployer to suspend trading, adjust open-interest limits, or liquidate the market. The operator had not published a final incident report by the time the coverage was released on July 28.