Kraken exchange co-CEO Arjun Sethi apologized for emails sent to customers withdrawing Monero (XMR), acknowledging the inquiries were inappropriate and had been rescinded.
The emails contained questionnaires asking XMR buyers to disclose their employers, provide proof of income and bank statements, and explain their intended use of withdrawn funds. One message stated: "We noticed Monero [XMR] withdrawals from your Kraken account. Could you explain the rationale and purpose of these transactions, including the intended use of XMR following withdrawals."
The correspondence drew widespread community backlash across social media platforms including Reddit. In response, Sethi clarified on X that the emails were not mandated by regulation but resulted from an internal false flag. He stated: "The $XMR emails were ours. They were wrong, unacceptable. No rule required it. Someone saw a young client with a lot of money and called it a red flag. That is not a red flag. That is our customer and client."
Sethi distinguished between legitimate compliance inquiries and post-withdrawal monitoring, writing: "Where your money came from is a fair question. What you do with it after it leaves is not. XMR stays listed. Buy it here, take it home."
Regulatory Context
Kraken's operations in the European Union, United Kingdom, and Canada have already suspended XMR trading, largely due to regulatory requirements. The EU plans to ban crypto custody of privacy coins beginning mid-2027, though individual self-custody ownership remains permitted. Trading privacy coins across regulated exchanges is prohibited in these jurisdictions.
Kraken U.S. continues to list XMR but has imposed monthly withdrawal and deposit limits since August. Individual customers may deposit up to $3,500 worth of XMR monthly and withdraw up to $1,500, while corporate accounts face limits of $30,000 and $10,000 respectively.
Market Impact
The controversy triggered selling pressure across exchanges, with XMR inflows spiking on Kraken and Bitfinex platforms. The price declined approximately 14 percent from a recent high of $659.60 to a low of $564.
