- The CFTC ordered Kraken to pay $ 1.25 million to facilitate commodity margin trading in digital assets.
- The order also stated that the company had not registered as a Futures Merchant (FCM).
- The CFTC said Kraken is offering this service to customers who were not eligible between June 2020 and July 2021.
- Sign up for our daily newsletter here, 10 things before the opening bell.
The Commodity Futures Trading Commission (CFTC) on Tuesday ordered the Kraken crypto exchange to pay a $ 1.25 million fine for illegally offering certain products.
The commodities and forex regulator said Kraken was fined for facilitating commodity margin trading in digital assets, including bitcoin, to clients who were not. eligible between June 2020 and July 2021.
The order also stated that the company had not registered as a Futures Merchant (FCM).
Kraken is one of the largest cryptocurrency exchanges in the world. Stock exchanges have been penalized in the past for offering products that do not comply with current regulations, for example.
“We appreciate that today’s regulation recognizes our cooperation and commitment on the matter. We commit to working with regulators to try to ensure that the rules governing digital assets create a level playing field across the board. global – one that allows the crypto space in the United States to flourish, while protecting the interests of individuals and the integrity of the industry, ”Kraken said in an emailed statement to Insider.
“As a company committed to reasonable regulation, we spoke to the CFTC about its proposed directions for margin trading and sought clarification on what the guidance would allow. In June of this year, we started limiting our margin products in the United States to eligible customers prior to entering into this agreement with the CFTC, ”the company said.
“This action is part of the CFTC’s larger effort to protect US customers,” Vincent McGonagle, acting director of enforcement, said in the CFTC order.
“The trading of digital assets on margin, leveraged or funded offered to US retail clients must take place on properly registered and regulated exchanges in accordance with all applicable laws and regulations,” said McGonagle.
The CFTC regulates the U.S. market for derivatives, commodities, currencies, fixed income securities, and certain crypto assets also under its jurisdiction.
The regulator cited a case in which a client purchased a digital asset using funds borrowed from the exchange, which then provided the digital asset or currency to the seller, known as margin trading.
The CFTC said Kraken asked its clients to exit their positions and return the funds they received on margin within 28 days, otherwise they could not be transferred. In the absence of a redemption, Kraken would request that the position be liquidated, or forcibly liquidated, if the collateral value falls below a certain threshold, which is common practice on all exchanges.
“As a result, actual delivery of the purchased assets did not take place. These transactions were illegal because they had to take place in a designated contract market and were not,” the order says.