The Commodity Futures Trading Commission (CFTC) has issued an order on Tuesday charging crypto exchange Kraken for illegally offering margined retail commodity transactions in digital assets.
The futures regulator has already settled the charges with the crypto exchange, requiring it to pay a civil penalty of $1.25 million, along with a cease and desist order from further violations of regulatory rules.
Kraken was founded in 2011 and is one of the oldest crypto exchanges in the US and also over the globe. It is also well-regulated and even holds a crypto banking license in the US state of Wyoming.
However, it is not allowed to offer margined products in the United States as it is not registered with the CFTC as a futures commission merchant (FCM).
According to the official announcement, Kraken offered digital asset margined products from around June 2020 to July 2021 to its US customers. The exchanges supplied the digital asset or fiat to pay the seller for the asset when a customer took a margined position. The exchange required them to repay or exit the position within 28 days, else it automatically liquidated the positions.
“This action is part of the CFTC’s broader effort to protect US customers,” said Vincent McGonagle, CFTC’s Acting Director of Enforcement. “Margined, leveraged or financed digital asset trading offered to retail US customers must occur on properly registered and regulated exchanges in accordance with all applicable laws and regulations.”
Rush in the US Crypto Derivatives Market
While crypto derivatives are popular in the international markets, only a few exchanges are licensed to offer them in the United States. But now, major crypto exchanges in the country are slowly jumping to receive permission to provide crypto derivatives.
Most recently, Coinbase applied for membership with the National Futures Association, while the US affiliate of FTX acquired the CFTC-regulated crypto derivatives exchange LedgerX.
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