The scrutiny that US regulators are imposing on cryptocurrency companies seems to be becoming a trend. Kraken is the latest company to run into trouble. The exchange had to pay a $1.25 fine for alleged illegal activity.
The US Commodity Futures Trading Commission issued an order on September 28 accusing Kraken of engaging in illegal margined retail commodity transactions involving digital assets. According to the regulator's website, the exchange offered such transactions to users who were not eligible contract participants, in violation of the Commodity Exchange Act (CEA).
While this does not get Kraken into serious trouble or cause any major losses, the overall trend seems alarming, as Kraken is not the first cryptocurrency exchange to attract the attention of financial regulators.
Back in August 2021, the Internal Revenue Service (IRS) began investigating Binance's activities due to money laundering issues. In fact, this has only been a minor issue for the exchange, as it is under scrutiny by regulators in numerous countries where it operates. Moreover, the regulator has not imposed any sanctions so far, which means that Binance is successfully compliant, at least in the US.
Earlier in September, Coinbase announced that it was experiencing friction with the US Securities and Exchange Commission. The regulator, known for its distrust of cryptocurrency businesses, threatened the exchange giant with a lawsuit over the launch of its Lend credit program, according to CoinIdol, a world blockchain news outlet. The strangest thing about this threat is that the SEC did not give any specific reasons for such a stance.
To address any potential issues and improve compliance, Coinbase has advertised the position of a Communications Manager to establish ties with the government. Binance, for its part, has hired a money laundering officer to address these issues.
The US is generally known for its friendly attitude towards cryptocurrencies. Numerous states are using cryptocurrencies and blockchain-based solutions to streamline various sectors. For example, Texas and Wyoming are competing to become the mining capital after miners fled China in search of better conditions.
On one hand, this much attention could simply be a sign of the lack of a clear regulatory framework for the industry. Financial regulators are keeping a close eye on the cryptocurrency business and trying to protect users from potential violations.
On the other hand, some might see a more alarming sign. The US is developing plans to create a CBDC and is trying to rival China in this area. Currently, the Communist Republic is cracking down on cryptocurrencies to pave the way for its digital yuan. Some might think that this is how the US is trying to follow China's lead and ensure the dominance of the upcoming digital dollar.
However, given the uncertainty surrounding the country's CBDC plans, it seems highly unlikely that the government will crack down on the crypto industry. Perhaps a clear and proper regulatory framework would make such friction with cryptocurrency companies less frequent.