The CFTC fined Kraken, one of the largest American digital currency exchanges, $1.25 million for violating CEA legislation.
Kraken failed to register as a Futures Commissions Merchant (FCM) in the Designated Contracts Market, according to the CFTC, and was illegally selling retail commodities transactions on cryptocurrency equivalent margins to investors (DCM).
The CFTC further says that the market drove investors who purchased assets on margin to abandon trading positions and refund the assets within four weeks. Kraken could unilaterally order the client to liquidate the assets if he did not comply with the obligation. The CFTC’s claim stemmed from offering margin trading to clients without a futures intermediary license from summer 2020 through summer 2021.
The limits have become one of “a wide variety of security practices for American clients,” according to CFTC official Vincent McGonagle. For her part, Commissioner Dawn Stump of the Commodity Futures Trading Commission emphasized the significance of more clarification on the subject of retail commodity transactions in crypto assets. She believes the CFTC should concentrate on bringing “certainty” to the market and gaining a better grasp of the digital currency industry. For example, even if the exchange is registered with FCM, it is unclear what rules it must follow, according to Stump. Furthermore, the application of existing FCM standards to bitcoin exchanges is new ground.
According to Kraken, Kraken has already talked with the CFTC to find out what is permissible while margin trading to check compliance with trading guidelines. After that, in the summer of 2021, the platform updated its policy to implement margin operations. The CFTC, on the other hand, believes Kraken is liable for a $1.25 million penalty since it has acted illegally up to this time.
As a reminder, BitMEX agreed to pay a $100 million fine to satisfy CFTC and FCEN charges in August, and Coinbase applied to become a futures intermediary.