San Francisco-based Kraken, one of the world’s largest cryptocurrency exchanges, is currently facing an investigation by the Securities and Exchange Commission (SEC). The regulator is examining whether the company broke securities rules regarding offerings made to American clients.
According to sources cited by Bloomberg, the probe is in its advanced stages and could lead to a settlement in the near future. Kraken is one of the top three largest cryptocurrency exchanges, boasting a daily trading volume of approximately $650 million. It offers support for over 185 cryptocurrencies and provides its users with staking rewards.
The Implications of the SEC Investigation
It’s unclear which tokens or offerings are being scrutinized. If the SEC takes action against Kraken, it could have far-reaching consequences for the already-under-fire cryptocurrency industry.
SEC Chairman Gary Gensler has warned crypto companies that the deadline for registering with the regulator is quickly approaching. A settlement with Kraken could put pressure on other crypto firms to reach agreements with the SEC, which has maintained that most tokens being offered are securities subject to its rules.
Kraken and the SEC have not made any public comments about the ongoing investigation. However, not all of these investigations lead to enforcement actions. Despite this, Companies and individuals may still face fines and penalties.
Kraken’s History with Regulators
It is not a novel occurrence for Kraken to have disagreements with US regulators. In the past, the company settled with the Treasury’s Office of Foreign Assets Control due to claims that it breached US sanctions against Iran.
As part of the settlement, Kraken agreed to pay a fine of more than $360,000 and invest $100,000 in sanctions compliance measures. In return, OFAC acknowledged Kraken’s self-disclosure of the violations and its cooperation during the investigation.
However, SEC is investigating Kraken’s competitor, Coinbase, over token listings. The SEC has not charged Coinbase with offering unregistered securities. In addition, SEC determines tokens on the exchange are securities in insider trading lawsuits.
Heightened Regulatory Oversight for the Cryptocurrency Sector. The SEC’s examination of Kraken is just one of many investigations faced by the industry.
The outcome of this investigation could have significant implications for the industry and potentially lead to further pressure on other crypto firms to reach settlements with the regulator.