Emmanuel OchayiThe U.S. Securities and Exchange Commission (SEC) escalated its regulatory crackdown on cryptocurrency exchanges, filing a lawsuit against Kraken, the third-largest global exchange.
Accused of operating without regulatory approval, this legal action dashes hopes within the sector of relaxed oversight following unfavorable court rulings.
“In a move that marks stringent regulation, the SEC’s lawsuit against Kraken aims to address the intertwined functions of an unregistered exchange, broker, dealer, and clearing agency,” stated Gurbir Grewal, Director of the SEC’s Division of Enforcement.
Kraken, celebrating its decade-long presence, countered the SEC’s accusations, asserting their exemption from mandatory registration. “We disagree, and intend to vigorously defend our position in court,” the company conveyed in a message on its website.
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The SEC accused Kraken of mingling customer funds with operational expenses, jeopardizing investor funds. This, according to the regulator, lacked necessary SEC oversight, including inspections, record-keeping, and conflict-of-interest safeguards.
Despite the legal fracas, Kraken assured clients of uninterrupted services, maintaining, “Today’s news has no impact on the products we offer, and we will continue to provide services to our clients without interruption.”
The SEC’s crackdown contradicts recent industry anticipation of leniency, particularly concerning Exchange Traded Funds (ETFs) backed by cryptocurrencies. These funds were expected to democratize crypto investments by allowing investors to trade them akin to conventional assets.
Observers anticipated a softer stance from the SEC, given recent court setbacks in October, which undermined the regulator’s quest to establish authority over cryptocurrencies.
However, this lawsuit against Kraken hints at a more stringent regulatory landscape for crypto exchanges, signaling a pivot away from relaxed oversight expectations.
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