The CFTC issued a $1.25 million fine to one of the biggest American digital currency exchanges, Kraken, for violating CEA legislation.

The CFTC stated that Kraken was illegally offering retail commodity transactions on cryptocurrency equivalent margins to investors and failed to register as a Futures Commissions Merchant (FCM) in the Designated Contracts Market (DCM).

In addition, the CFTC claims that the marketplace forced investors who bought assets on margin to exit trading positions and repay the assets within four weeks. In the event that the client did not comply with the requirement, Kraken could unilaterally force him to liquidate the assets. Tendering margin trading to consumers in the lack of a futures intermediary license from summer 2020 to summer 2021 was ultimately the cause of the CFTC's claim.

CFTC official Vincent McGonagle said the restrictions have become one of "a wide range of security practices for American clients." CFTC Commissioner Dawn Stump, in turn, likewise stressed the importance of further clarity on the issue of retail commodity transactions in crypto assets. She believes that the CFTC requires to focus on providing “certainty” in the market and come to an understanding of the digital currency industry. Even if the exchange were registered by FCM, it is not clear what rules it would have to comply with, Stump said. In addition, the application of the already existing FCM rules to cryptocurrency exchanges is still “uncharted territory”.

In an effort to monitor compliance with trading rules, Kraken has previously communicated with the CFTC to find out what is acceptable when trading on margin, according to Kraken. After that, the platform revised its own policy for the implementation of margin operations in the summer of 2021, updating it. However, the CFTC believes Kraken is under an obligation to pay a $1.25M fine because it has acted illegally up to this point.

As a reminder, in August, BitMEX accepted a $100 million fine to settle claims from CFTC and FCEN, and Coinbase filed an application to become a futures intermediary.

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