Cryptocurrencies: the Kraken platform in the sights of the American regulator

Published on Nov. 21, 2023 at 7:43 a.m.Updated Nov. 21, 2023 at 7:44 a.m.

Some players believed that the Security and Exchange Commission (SEC) had let its guard down following a series of legal decisions unfavorable to cryptocurrency platforms. A new ignment contradicts this impression. Thus, the SEC on Monday began legal proceedings against Payward and Payward Ventures, the two legal entities behind Kraken, the third player in the market.

The site, which recently celebrated its tenth anniversary, is criticized for offering intermediary and clearing services “ without registering for none of these functions. This “deprived investors of significant protection”, which, according to the regulator, SEC inspections, conservation of market data and provisions against conflicts of interest, provided for by the texts.

“Considerable” risk of loss

The authorities also accuse Kraken of mixing its own funds with those of its clients, and of having notably paid operating expenses with money taken from the deposits of users of the platform. With a ” considerable risk of losses » for customers, according to the SEC. Kraken’s business model is “riddled with conflicts of interest that put investors’ funds at risk,” summarized Gurbir Grewal, director of the enforcement division.

In a reaction posted on its site, the platform affirms that the SEC’s position is a misinterpretation of the texts and that it does not have to register with the regulator. “These developments have no effect on the products we offer and we will continue to offer our services to our customers without interruption,” adds Kraken.

No SEC relaxation

The world of cryptocurrencies had recently regained color, observers anticipating the green light from the SEC for the marketing of a new cryptocurrency investment product . These are ETFs, or index funds, invested in bitcoins and which savers could buy or sell at any time without having to go through a cryptocurrency exchange platform, which would be likely to democratize investment in digital currencies .

The hope of a softening of the SEC’s position was based in particular on two legal setbacks, in October, which undermined the regulator’s desire to establish itself as the reference authority for cryptocurrencies.

This legal action appears to be a denial to the many players in the sector who saw the SEC slowing down in terms of repression, after a series of unfavorable legal decisions . In June, the regulator had already attacked Binance, the world’s leading platform, and his runner-up Coinbase .

With AFP

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