The United States Commodity Futures Trading Commission (CFTC) has fined the Kraken exchange for providing illegally margined retail commodity transactions in digital assets, including Bitcoin (BTC).
According to the order, in addition to paying a civil fine of $1.25 million. The platform must “cease and desist from further violations of the Law on Commodity Exchanges in accordance with the charge”.
Our actions are part of the CFTC’s efforts to protect US customers
Thus, from about June 2020 to July 2021, Kraken offered margined retail commodity transactions in digital assets to customers from the United States, according to the regulator. These transactions were illegal because they should be made on specialized contract markets (designated contract market, DCM).
In addition, the exchange acted without registering as a futures commission merchant (FCM), the Commission noted.
“Our actions are part of the CFTC’s efforts to protect US customers. Trading of digital assets with margin, borrowed funds or financing offered to retail customers must take place on properly registered and regulated exchanges in accordance with all applicable laws and regulations”. Said Vincent McGonagle, the Principal Deputy Director of the Division of Enforcement at the CFTC.
Coinbase application for FCM registration
Previously, the largest US cryptocurrency exchange Coinbase has applied for FCM status. Bitcoin exchange has sent an application to the National Futures Association (NFA) for registration as a futures intermediary (FCM). Moreover, in the future, the move will allow the company to obtain a CFTC license.
In the US, companies wishing to offer derivatives to customers must obtain a CFTC license. To do this, they usually need to be members of the self-regulatory organization NFA, which conducts registration on behalf of the agency.
The terms of approval of the application by the cryptocurrency exchange are unknown. Also, on the NFA website, Coinbase Financial Markets is listed as a “pending NFA member”.