Kraken to pay $ 1.25 million in CFTC fines for offering illegal margin crypto trading products


  • The U.S. CFTC has ordered Kraken to pay more than $ 1 million in penalties following allegations the exchange violated the Commodity Exchange Act.
  • According to the regulator, the crypto exchange failed to register as a futures trader before offering trading in retail commodities with margin in digital assets.
  • Kraken has limited its margin on crypto products since June 2021.

The Kraken cryptocurrency exchange will pay $ 1.25 million in settlement fees to the United States Commodity Futures Trading Commission (CFTC), which alleged that the company offered illegal trading services and failed to act. not registered with the regulatory body.

CFTC to Provide Clarification on ‘Rules of the Road’ for Crypto Firms

The CFTC said the San Francisco-based digital asset exchange violated the Commodities Exchange Act by offering cryptocurrency products with margin from June 2020 for one year without first registering with the agency.

One of the largest crypto exchanges in the world and founded in 2011, Kraken failed to register as a Futures Merchant (FCM) or Designated Contract Market (DCM) with the CFTC prior to d ” offer crypto trading services on margin.

Companies wishing to list, trade or offer futures products must register as an FCM or DCM with the CFTC. According to the official press release, Kraken retained sole custody of the margin assets for the one year period.

Meanwhile, Kraken has reportedly offered potential and existing US customers access to commodity margin trading on the platform. The CFTC also added that the exchange also offers margin ratios of up to 5: 1.

The agency’s acting director of law enforcement, Vincent McGonagle, said the settlement was part of a “larger effort to protect US customers.”

The settlement involves a fine of $ 1.25 million, also known as a “civil monetary penalty”, within a month and Kraken is expected to stop offering this type of margin to US citizens. The platform has also waived any right to hearings or judicial reviews regarding the case.

However, CFTC commissioner Dawn Stump said it could be difficult for the San Francisco-based company to comply with current regulations given guidance on issues such as the “real delivery” of crypto. -coins. It is still unclear how the digital asset exchange might be regulated as an FCM, as the current rules regarding the regulation of traditional FCM entities do not match the role of the crypto firm as an exchange.

Stump added that a rule-making procedure could be added to clarify the “rules of the road” for other cryptocurrency exchanges and businesses in the future.

In June 2021, Kraken requested clarification on the CFTC’s margin trading regulations and limited its margin products.

The penalty imposed on the main crypto exchange is considered small compared to the company’s $ 10 billion valuation. BitMEX, a crypto derivatives exchange was fined $ 100 million in August 2021 by the CFTC and the Financial Crimes Enforcement Network.

Earlier this year, the Internal Revenue Service (IRS) began to conduct an “extensive and ongoing investigation involving substantial IRS resources” into cryptocurrency holders. IRS Sends “John Doe” Summons to Various Cryptocurrency Companies Including Kraken to Request Court Orders Requiring Digital Asset Exchanges to Hand Over Account Holder Names and Other Identifying Information keys.


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