STS Digital, a Bermuda-regulated firm that operates as a principal dealer in crypto options, acting as both exchange and market maker rather than just a venue, has added structured products to its platform and signed Kraken as its first distribution partner. Structured products are pre-packaged investment strategies that combine derivatives with defined risk and return parameters. 

In traditional finance they are common: a bank might package a bond with an equity option to give an investor upside exposure while protecting most of their principal.

STS Digital CEO Maxime Seiler told The Block the same logic now applies to crypto. “Structured products essentially package up options and complex products into a simple investment product that gives you a defined payout at maturity,” he said.

Seiler gave two examples. A principal protected note lets an investor seeking long Bitcoin exposure lock in downside protection via bond premiums, so that even in a market crash their worst case is losing 20% of capital while 80% of principal is preserved. 

A yield enhancement note has the investor selling options to collect premium as yield if the market stays flat, with annualised premiums ranging from “low single digit to triple digit” depending on the structure. 

STS’s modular platform lets institutional users configure the underlying crypto derivative, maturity date, strike price, and payout structure independently. The primary audience is banks, institutional investors, family offices, and high-net-worth individuals seeking structured digital asset exposure.

What Kraken Actually Gets

Kraken accesses the STS structured product platform via API, but the version on the exchange is a retail-oriented subset. “It’s not fully modulated,” Seiler said. “It’s going to be a defined set of products and payoffs on their platform, and clients can subscribe into it.” 

The integration went live quietly in select regions about ten days ago. STS supports more than 400 cryptocurrencies across standard and exotic options, with plans to add tokenised equities, foreign exchange, and commodities this year, each of which could serve as the basis for future structured products.

Background on STS Digital

STS Digital is regulated in Bermuda as a custodian, derivatives exchange, and market maker. The firm now employs approximately 60 people, having doubled its headcount in the past year, and is hiring an additional 20. 

In February, CMT Digital led a $30 million strategic funding round with Kraken’s parent Payward among the co-investors, making Kraken a natural first distribution partner.

Seiler said bringing structured products to retail via Kraken is deliberate: historically only institutional clients could access these instruments in crypto, and the defined subscription format is designed to change that. Whether retail appetite for principal-protected notes and yield enhancement products materialises is what the beta launch is designed to test.