US-based cryptocurrency Exchange Kraken announced that the number of subpoenas it has received from various government organizations around the world nearly tripled from 2017 to 2018 year-over-year in a tweet on January 5.
More precisely, Kraken claims that it received 475 government inquiries in 2018 compared to just 160 in 2017. In 2016, there were only 71 such inquiries.
Peek at our Compliance team's 2018 Transparency Report. You can see why many businesses choose to block US users. Cost of handling subpoenas (regardless of licenses) is quickly becoming a barrier to entry. Inquiries up 3x YoY. pic.twitter.com/YbyLEqhOUf
— Kraken Exchange (@krakenfx) January 5, 2019
Kraken also explicitly stated that the vast majority of these inquires--315 of them--had come from United States government organizations. “You can see why many businesses choose to block US users,” the tweet stated, adding that the “cost of handling subpoenas (regardless of licenses) is quickly becoming a barrier to entry.”
Data showing the number of inquiries by country. (Source: Kraken Twitter feed)
Kraken also stated that while the US government is responsible for two-thirds of the inquiries it has to handle, US-based customers make up just one-fifth of its user base. “US agencies are much more active and are much less surgical” in comparison to the agencies of other governments, Kraken explained. “For many requests, we have no matches. It wouldn't be surprising to find that the same subpoenas go out to everyone in the hopes that a match will be found.”
According to Kraken, the trouble with the “less surgical” nature of the US government’s requests is that handling them “often [requires] a significant amount of education and back-and-forth.”
“We'll get requests for ‘all transactions,’ which could be petabytes of data when they actually only need the withdrawals from last week for one guy,” the exchange tweeted.
Kraken Has Clapped Back At US Gov. Before
This isn’t the only time that Kraken has sounded off over what it seems to feel are unfair inquiries. In April of 2018, the exchange publicly announced that it would not be answering requests for an inquiry from New York Attorney General Eric Schneiderman, who (at the time) sent the same letter of inquiry to 13 separate cryptocurrency exchanges. (The other 12 exchanges reportedly welcomed the inquiry.)
In a blog post, Kraken CEO Jesse Powell wrote that Kraken would not be responding due to the short deadline outlined in the request as well as the fact that Kraken no longer operated in New York at the time the inquiry was made.
Somebody has to say what everybody's actually thinking about the NYAG's inquiry. The placative kowtowing toward this kind of abuse sends the message that it's ok. It's not ok. It's insulting. https://t.co/sta9VuXPK1 pic.twitter.com/4Jg66bia1I
— Jesse Powell (@jespow) April 18, 2018
Kraken Recently Valued at $4 Billion
In spite of Kraken’s controversial relationship with certain aspects of the US government, the company must be doing something right. In December, the exchange announced that its valuation had hit $4 billion and that it was seeking a small number of fundraising clients to purchase shares at a minimum of $100,000.
An email sent to investors at the time of the announcement described the fundraising round as the exchange’s effort to “[present] our most valued clients with the opportunity to become equity holders in the company.”
“We’re profitable and sitting on significant reserves so fundraising is not a necessity, however, further aligning interests with our top clients while building a war chest for acquisitions in the bear market presents a win-win opportunity,” the email said.
