{"id":472710,"date":"2021-09-29T09:14:03","date_gmt":"2021-09-29T09:14:03","guid":{"rendered":"https:\/\/wncen.com\/?p=472710"},"modified":"2024-06-11T13:59:03","modified_gmt":"2024-06-11T13:59:03","slug":"cftc-fines-kraken","status":"publish","type":"post","link":"https:\/\/wncen.com\/news\/cftc-fines-kraken\/","title":{"rendered":"Did US Regulators Began Offensive Against Crypto Platforms? CFTC Fines Kraken"},"content":{"rendered":"

One of the biggest cryptocurrency exchanges, Kraken, received a $1.25M fine. <\/span>The Commodity Futures Trading Commission<\/span><\/a> imposed the \u201c<\/span>civil monetary penalty<\/span><\/i>\u201d plus a cease and desist from \u201c<\/span>further violations of the Commodity Exchange Act (CEA)<\/span><\/i>\u201d on September 28th. According to the CFTC, Kraken provided margin for commodity transactions to retail clients in the U.S. who were not suitable to use those products.<\/span><\/p>\n

Related Reading | How the CFTC fine on Coinbase could affect future crypto company listing<\/a><\/strong><\/em><\/p>\n

The fine, however, seems like a slap on the wrist for a gargantuan company like Kraken. They\u2019re a private company and their annual revenue is not on the public domain, but they raised $100M at a $4B valuation in 2019. And, reportedly, Kraken was seeking a $20B valuation this year following an IPO that didn\u2019t happen. For a company that size, a $1.25M fine is not much, but maybe the punishment just fits the violation.<\/span><\/p>\n

\"ETHUSD<\/p>\n

ETH price chart on Kraken | Source: ETH\/USD on TradingView.com<\/a><\/pre>\n
What Did Kraken Do Exactly?<\/span><\/h2>\n
The violation occurred between June 2020 and July 2021 approximately. During that period, \u201cKraken illegally operated as an unregistered FCM<\/em>.\u201d And, what did the unregistered futures commission merchant offer? Well, U.S. customers could acquire digital assets using margin, and Kraken provided said asset or the fiat money \u201c<\/span>to pay the seller for the asset.<\/span><\/i>\u201d Of course,\u00a0 users had to provide collateral and pay for the received asset within 28 days.\u00a0<\/span><\/p>\n
If they didn\u2019t pay in the established period, \u201c<\/span>Kraken could unilaterally force the margin position to be liquidated.<\/span><\/i>\u201d They could also liquidate \u201c<\/span>if the value of the collateral dipped below a certain threshold percentage of the total outstanding margin.<\/span><\/i>\u201d In short, Kraken was selling derivatives and extending credit without registering as an FCM.\u00a0 \u201cThese transactions were unlawful because they were required to take place on a designated contract market and did not.<\/em>\u201d<\/span><\/p>\n
The CFTC\u2019s Acting Director of Enforcement, Vincent McGonagle, said in the press release:<\/span><\/p>\n
\u201cThis action is part of the CFTC\u2019s broader effort to protect U.S. customers. 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.\u201d<\/span><\/p><\/blockquote>\n
The Cryptocurrency Exchange\u2019s Latests Plays<\/span><\/h2>\n
Over the last few months, Kraken representatives went hard on the traditional financial system. From their Director <\/span>Dan Held calling the whole thing \u201c<\/span>a cartel<\/span><\/i>,\u201d<\/span><\/a> to CEO Jesse Powell predicting that <\/span>cryptocurrency companies would replace them<\/span><\/a> within a decade. In Held\u2019s tweet, he attached a graphic that showed how the consolidation of the US banking sector advanced through the years. Nowadays, just four institutions control it all:\u00a0<\/span><\/p>\n
\n
The traditional banking system is a cartel.#Bitcoin<\/a> fixes this. pic.twitter.com\/LEFCTb6g93<\/a><\/p>\n
— Dan Held (@danheld) July 1, 2021<\/a><\/p><\/blockquote>\n