SEC Levels New Charges Against Kraken, Senator Cynthia Lummis Calls for Regulatory Clarity

The well-known San Francisco-based bitcoin exchange Kraken is the target of increased legal action by the U.S. Securities and Exchange Commission (SEC). Kraken has been accused by the SEC of running its cryptocurrency trading platform in the capacities of a clearing agency, broker, dealer, and unregistered securities exchange. According to the regulatory agency, Kraken’s activities have made it illegal to acquire and sell assets backed by cryptocurrency, which has allowed the exchange to make significant profits.

SEC Accuses Kraken of Prioritizing Profits Over Investor Protection

The head of the SEC’s Division of Enforcement, Gurbir S. Grewal, attacked Kraken’s business choices, claiming that the exchange put shareholder safety last and profits first. According to the SEC, Kraken’s business strategy led to conflicts of interest and jeopardized the money of investors. Following the SEC’s initial allegations against Kraken earlier this year, the exchange agreed to pay a $30 million civil penalty and ceased its staking services. This most recent legal action follows.

The proceedings taken by the SEC against Kraken have drawn criticism from Senator Cynthia Lummis of Wyoming, who described them as just another example of “ruling by enforcement.” Lummis brought attention to the difficulties crypto asset firms have in getting SEC advice, which might result in enforcement proceedings that have a negative effect on customers. She urged the Lummis-Gillibrand Responsible Financial Innovation Act to be passed, stressing the necessity of a legal framework that would give the SEC precise guidelines on how to classify commodities and securities. Strongly pro-cryptocurrency, Lummis wants federal regulation of digital assets implemented in the United States by the beginning of 2019.

Jesse Powell, a co-founder of Kraken, criticised the SEC’s ongoing legal action, saying the agency is “back for seconds.” Powell emphasized the financial hardship brought about by the SEC’s efforts, pointing out that a genuine court battle may cost more than $100 million, making it difficult for cryptocurrency businesses to negotiate the regulatory environment in the United States.