Kraken has apologized and withdrawn questionnaires that asked customers for sensitive personal details before withdrawing Monero (XMR), after co-CEO Arjun Sethi acknowledged the exchange had improperly questioned users about how they intended to spend their cryptocurrency.

The emails, sent to customers who had purchased XMR with their own money, asked them to disclose their employer, their source of funds, and what they planned to do with the tokens after withdrawal. The exchange has since contacted affected clients to inform them that no response is required.

In an October 23 statement on X, Sethi accepted responsibility for the requests, describing them as an internal mistake rather than a regulatory requirement. He also confirmed that Monero will remain listed and available for withdrawal in the jurisdictions where Kraken still supports the asset.

Kraken Reverses Questions About Customers’ Monero Spending

The controversy came to light after customers received enhanced due diligence questionnaires following XMR purchases and withdrawals. Beyond asking where customers obtained their money, the forms sought details on how they intended to use their cryptocurrency once it left the exchange.

Sethi traced the decision to an internal assessment that treated a younger customer holding a substantial sum of money as a potential risk indicator. He rejected that reasoning and confirmed that no applicable rule required the additional questions.

Kraken has withdrawn the requests and notified recipients that no further response is necessary.

Sethi also drew a distinction between verifying the origin of customer funds and monitoring their spending after withdrawal: “Where your money came from is a fair question. What you do with it after it leaves is not.” The distinction highlights where an exchange’s compliance obligations typically end: source-of-funds checks apply while assets sit on the platform, but Monero’s privacy design leaves even on-chain activity opaque to outside observers once coins are withdrawn.

Kraken has not disclosed how many customers received the questionnaires, how long the practice continued, or which jurisdictions were affected.

Standard Source-of-Funds Checks Remain in Place

Kraken will continue conducting source-of-funds verification as part of its anti-money laundering and customer due diligence procedures. According to the exchange’s guidance on responding to requests for additional information, those checks can require bank statements, employment documentation, or evidence of investment income, depending on a customer’s circumstances and transaction activity.

Kraken’s compliance framework also permits additional reviews when account behavior changes, or when the size or type of a transaction raises questions. The withdrawal of the Monero questionnaire does not eliminate those requirements—the correction concerns only the added demands for information about how customers intend to use funds after removing them from the platform.

Kraken’s handling of customer information has previously attracted scrutiny. In April, the exchange disclosed unauthorized access to customer data involving recruited insiders, followed by extortion attempts against the company. That incident concerned internal security and customer data rather than Monero withdrawal monitoring, but both episodes have placed Kraken’s treatment of sensitive client information under examination.

Monero Remains Listed Despite Regional Restrictions

Kraken’s decision to retain Monero comes as the privacy-focused cryptocurrency continues to face restrictions across regulated trading platforms. Monero’s underlying cryptographic design conceals transaction amounts and participant information, limiting the ability of outside observers to reconstruct payment histories. That design has prompted delistings elsewhere: Binance and OKX both removed XMR in early 2024 amid heightened scrutiny of privacy coins.

Demand for XMR has remained significant despite exchange delistings. Earlier research into Monero activity identified continued transaction growth and increasing adoption among privacy-focused users, even as access through centralized exchanges became more restricted.

Kraken removed Monero trading and deposits for European Economic Area customers on October 31, 2024, with withdrawals ending two months later, according to the company’s support documentation. Similar regional restrictions apply in other markets, including Canada and Australia, and Sethi’s latest assurances do not reverse those existing measures.

Monero remains supported only in eligible jurisdictions, where customers can continue purchasing and withdrawing XMR under Kraken’s standard compliance procedures. The exchange has not announced additional restrictions, a new Monero-specific questionnaire, or changes to its existing source-of-funds verification requirements.

Source: Crypto Adventure