Kraken CEO Hits Back: SEC’s Allegations Deemed ‘Factually Incorrect’

Sahana Kiran
Source – SignHouse

The regulatory environment for cryptocurrencies is currently under intense scrutiny, with the U.S. Securities and Exchange Commission (SEC) recently initiating legal proceedings against Kraken’s parent entities, Payward and Payward Ventures. Kraken, a prominent cryptocurrency exchange, has strongly contested the allegations, affirming that its products and operations remain unaffected.

SEC Lawsuit: Accusations and Kraken’s Reply

The SEC’s legal action accuses Kraken’s parent companies of functioning as an unregistered online trading platform. This mirrors actions taken against major exchanges like Coinbase and Binance. In a blog post, Kraken voiced strong disagreement with the SEC’s claims.

Kraken specifically highlighted that the SEC’s complaint did not allege fraud, market manipulation, customer losses due to hacking, compromised security, or breaches of fiduciary duty. Despite the substantial dollar amounts cited in the complaint, Kraken noted that there was no assertion that any funds were missing or misused. According to Kraken, the SEC’s characterization of its products as investment contracts was labeled as “incorrect as a matter of law, false as a matter of fact, and disastrous as a matter of policy.”

In its official statement, Kraken criticized the SEC’s strategy of “regulation by enforcement,” contending that it stifles innovation and harms U.S. competitiveness globally. The exchange lamented the lack of regulatory clarity in the U.S. crypto market. The exchange even advocated for legislative measures as the most suitable approach to address the distinct risks and benefits presented by cryptocurrencies.

Expressing disappointment in the SEC’s insistence on legal action against crypto exchanges without a clear pathway to registration and lacking legislative support, Kraken underscored the necessity for effective U.S. market regulation that takes into account the unique nature of cryptocurrencies. The exchange called for a resolution through congressional action.

Also Read: SEC Sues Kraken Crypto Exchange

Industry-wide Impact: Coinbase and Binance

The SEC’s legal actions against Kraken mirror similar lawsuits against other major exchanges, such as Coinbase and Binance. Faryar Shirzad, Chief Policy Officer at Coinbase, echoed sentiments akin to Kraken’s. He highlighted the importance of adhering to actual laws and the rule of law for a government to govern with the consent of the governed.

Binance, facing a substantial demand from the U.S. Department of Justice seeking over $4 billion, is reportedly engaged in negotiations to conclude an ongoing investigation. The intensified regulatory pressure on these major exchanges underscores the heightened scrutiny and challenges confronting the cryptocurrency industry.

Kraken’s resolute response to the SEC lawsuit mirrors a prevailing sentiment within the cryptocurrency community. Exchanges are resisting perceived regulatory overreach. The industry is advocating for legislative clarity and a regulatory framework. As legal battles unfold, the outcomes are poised to significantly shape the future regulatory landscape for cryptocurrency exchanges. This is for both the United States and globally.

Also Read: US Seeking Over $4 Billion From Binance to End Criminal Case