Monero is private by default, and lacks ways to make exceptions to that privacy for governments. They don't like that, because they want to spy on people's finances, and have been both banning it directly and putting pressure on exchanges to get rid of it. For instance a few years ago the US government got Binance to delist it as part of the settlement terms of a lawsuit against them. Kraken is a US company and is the only centralized cryptocurrency exchange left that both offers Monero and will let you withdraw/deposit US dollars.

The text in the email says a lot:

These limits are being introduced as part of Kraken's ongoing efforts to maintain risk-based compliance controls while continuing to support XMR trading and transfers.

Emphasis mine, they are doing it to try to keep the government happy, government does not like financial privacy.