Kraken has launched kHYPE, a wrapped version of Hyperliquid's HYPE token that clients can use in decentralized finance while the underlying tokens stay in Kraken's custody. Each kHYPE is backed one-to-one by HYPE, and the reserves can be inspected onchain.

kHYPE is an ERC-20 token and is available at launch on Ink, Kraken's Ethereum layer-2 network. Clients withdraw HYPE from Kraken as kHYPE on Ink, where they can use it in applications, including posting it as collateral on the Tydro lending market to borrow USDC.

The design gives HYPE holders a way to put the asset to work outside Hyperliquid's own chain. It also brings a new collateral asset to Ink, whose DeFi activity depends on attracting assets that users already hold elsewhere.

Kraken said it plans to extend kHYPE to other networks but did not name them or set a timetable. Wrapped tokens carry custodial risk, so the value of the onchain reserve proof and the depth of lending markets that accept kHYPE will determine how widely it is used.