Did US Regulators Began Offensive Against Crypto Platforms? CFTC Fines Kraken
September 29 2021 - 5:14AM
NEWSBTC
One of the biggest cryptocurrency exchanges, Kraken, received a
$1.25M fine. The Commodity Futures Trading Commission imposed the
“civil monetary penalty” plus a cease and desist from “further
violations of the Commodity Exchange Act (CEA)” 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. Related Reading | How the CFTC fine on Coinbase
could affect future crypto company listing The fine, however, seems
like a slap on the wrist for a gargantuan company like Kraken.
They’re 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’t happen. For a company that size, a
$1.25M fine is not much, but maybe the punishment just fits the
violation. ETH price chart on Kraken | Source: ETH/USD on
TradingView.com What Did Kraken Do Exactly? The violation occurred
between June 2020 and July 2021 approximately. During that period,
“Kraken illegally operated as an unregistered FCM.” 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 “to pay the seller for the
asset.” Of course, users had to provide collateral and pay
for the received asset within 28 days. If they didn’t pay in
the established period, “Kraken could unilaterally force the margin
position to be liquidated.” They could also liquidate “if the value
of the collateral dipped below a certain threshold percentage of
the total outstanding margin.” In short, Kraken was selling
derivatives and extending credit without registering as an
FCM. “These transactions were unlawful because they were
required to take place on a designated contract market and did
not.” The CFTC’s Acting Director of Enforcement, Vincent McGonagle,
said in the press release: “This action is part of the CFTC’s
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.” The
Cryptocurrency Exchange’s Latests Plays Over the last few months,
Kraken representatives went hard on the traditional financial
system. From their Director Dan Held calling the whole thing “a
cartel,” to CEO Jesse Powell predicting that cryptocurrency
companies would replace them within a decade. In Held’s 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: The traditional banking system
is a cartel.#Bitcoin fixes this. pic.twitter.com/LEFCTb6g93 — Dan
Held (@danheld) July 1, 2021 Related Reading | Bitcoin Slides 5%
From Recent Highs Amidst Binance CFTC Probe Revelation For his
part, the last day of March, Powell told Bloomberg: “Most of these
guys haven’t done the work these last ten years to make sure they
are current with the crypto technology. So I think there’s a very
real risk that over the next ten years, for those legacy businesses
to be simply replaced.” In more recent news, Kraken is trying to
re-enter the European market. The company was licensed to operate
through the UK’s Financial Conduct Authority. Thus, since Brexit
happened, they have to find a new home for their license. When
NewsBTC covered the news, we said: “Powell added that the Kraken
exchange seeks to re-enter Europe by the end of 2021. It will go
with the Republic of Ireland, Malta, and Luxembourg, among possible
countries, to award such a license. However, they are yet to fix an
official date as the talk still goes on.” Will the $1.25M fine the
CFTC imposed throw a wrench on those, or any of Kraken’s plans?
Certainly not. Not by a long shot. Featured Image by Erik
Tanghe from Pixabay - Charts by TradingView
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