The Commodity Futures Trading Commission (CFTC) has fined US cryptocurrency exchange Kraken for selling unlicensed crypto goods.
According to a statement released by the CFTC on Sept. 28, Kraken enabled US consumers to access goods that were meant to be off-limits to them. Kraken must pay a $1.25 million civil monetary penalty and “stop and desist from additional violations of the Commodity Exchange Act,” according to the judgment.
Between June 2020 and July 2021, the exchange, which was formed in 2011, permitted its US customers to trade margin items. Additionally, it was charged with failure to register as a futures commission merchant (FCM).
Americans do not have a margin.
According to CFTC acting enforcement director Vincent McGonagle, the business must register with regulators in order to provide such products.
“Margined, leveraged or financed digital asset trading offered to retail U.S. customers must occur on properly registered and regulated exchanges in accordance with all applicable laws and regulations,”
He said that the action is part of a broader effort by the CFTC to protect American customers. Regulators are opposed to margined retail commodities transactions in digital assets due to the increased risk of liquidation. Kraken was the sole margin provider and had custody of all assets purchased on margin for the duration of the customer’s open margined position, according to the ruling.
It said that traders would be unable to withdraw margin assets for 28 days since Kraken would retain them. Additionally, the exchange may “initiate a forced liquidation” if the collateral’s value falls below a specified percentage of the total outstanding margin.
The CFTC settled its claims against Kraken without admitting or rejecting them, and the agency commended the firm for its cooperation. Kraken stated in a statement that it is dedicated to collaborating with regulators to ensure that crypto-asset regulations establish a level playing field for traders worldwide.
Warning Regarding Regulations
In April of this year, Kraken CEO Jesse Powell warned that the cryptocurrency business would almost certainly face increased regulation in the United States.
In an interview with CNBC at the time, he stated, “I hope that the US and international regulators do not take an overly narrow view of this.” Other countries, like China, are taking cryptocurrency very seriously and adopting a long-term perspective.”
In May, a California court ordered Kraken to submit information to the Internal Revenue Service on users who executed cryptocurrency exchanges worth at least $20,000 between 2016 and 2020.
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