The US Commodity Futures Trading Commission has ordered Kraken exchange to pay more than $1 million in civil monetary penalties in connection with charges that the exchange violated the Commodity Exchange Act.
The CFTC stated in a statement on Tuesday that Kraken, a cryptocurrency exchange based in the United States that operates under the name Payward Ventures, has failed to register as a futures commission merchant and is illegally conducting margined retail commodity transactions in digital assets.
The decision demands that the exchange pay a $1.25 million fine and “cease and desist from additional violations of the Commodity Exchange Act,” which gives the CFTC a lot of authority over commodities and futures trading.
The CFTC’s acting head of enforcement, Vincent McGonagle, said, “This action is part of the CFTC’s broader endeavour to protect U.S. customers.”
“All digital asset trading offered to retail users in the United States must take place on fully registered and regulated exchanges in line with all applicable laws and regulations.”
The CFTC claims that from June 2020 to July 2021, Kraken “offered margined retail commodities trades in digital assets” to ineligible U.S. consumers.
Customers had to close or settle their positions within 28 days until June 2021, according to Kraken’s policy on margin trading. The company was operating unlawfully, according to the CFTC, because the transactions did not take place on a regulated contract market.
The CFTC said that if payments were not made within 28 days, Kraken might unilaterally liquidate the margin position. “If the value of the collateral fell below a particular threshold percentage of the total outstanding margin, Kraken might force a liquidation. As a result, delivery of the purchased assets did not take place.”
The enforcement action appears minor in comparison to the magnitude of a big crypto exchange like Kraken – some estimates have the company’s value at $10 billion, with the monetary penalty accounting for 0.0125 percent of that.
The CFTC and the Financial Crimes Enforcement Network, on the other hand, penalized BitMEX, a crypto derivatives exchange, $100 million in August.
Dan Berkovitz, the current commissioner of the CFTC and soon-to-be general counsel of the Securities and Exchange Commission, has previously described the former’s crypto enforcement actions as “aggressive,” but also stated that the agency was “not necessarily looking for more authority without more resources.”
Berkovitz will leave the CFTC in October, and US President Joe Biden has nominated Kristin Johnson and Christy Goldsmith Romero to fill two of the agency’s vacant commissioner positions.
