The regulator charged Kraken with violating Commodity Exchange Law by offering crypto products on margin without the required registration.
Kraken, one of the first cryptocurrency exchanges in the United States of America, will have to pay a fine of one million dollars to resolve the charges imposed by the regulator of the options and futures market of that country.
The Commodity Futures Trading Commission (CFTC) has filed and resolved charges against Kraken for failing to register as a futures commission trading platform and offering margin transactions in cryptocurrencies. The regulatory agency highlighted the case in a statement on September 28.
According to official sources, the order needs Kraken to pay a civil monetary fine of $ 1.25 million and to cease and desist from further disruptions of the Commodity Exchange Act (CEA).
Vincent McGonagle, acting director of compliance explained in the statement that this action is part of the CFTC’s broader effort to protect US clients.
Kraken Reaches an Agreement with Regulators
The CFTC charged the exchange for violating the Commodity Exchange Act between June 2020 and June 2021 by offering cryptocurrency products on margin without having a Designated Contract Market or FCM registration. Kraken offered margin trading of up to 5: 1, but the regulator called it illegal.
In the US, entities wishing to list or trade futures products must register as FCM, while a DCM license will serve to offer futures products, According to CoinDesk. In a margin operation, cryptocurrency traders borrow money to invest and keep their position in the market.
The deal between the exchange and the CFTC arrives three months after Kraken suspended its leveraged products. In June, Kraken commented on limiting its margin products for customers in the US in an attempt to apply regulatory clarity.
The Need for Greater Regulatory Clarity
In addition to paying the fine and agreeing not to commit further violations, the terms of the agreement also add that the exchange waives its right to any court hearing or review.
Meanwhile, in a separate statement, CFTC Commissioner Dawn Stump highlighted that the case outlined the need for clarity of the Commission’s Final Interpretive Guidance, issued in 2020, on retail commodity transactions involving certain digital assets.
In fact, Dawn even admitted that it could be hard for Kraken and other crypto exchanges to comply with the law. The commissioner explained that, under current regulations, the way Kraken could face its regulation was unclear, noting that it would be unprecedented for a company to register as DCM and FCM at the same time.
Along these lines, the commissioner suggested the opening of a regulatory drafting procedure to bring clear rules of the road for exchanges and other entities in the crypto industry.
By: Jenson Nuñez
