Crypto Market Falls After the SEC’s Accusation of Kraken
Prices in the crypto market are falling due to the SEC statement against Kraken this Thursday. The Commission accuses the crypto exchange of abusing customer protection and the unregistered offering and selling of crypto assets.
The crypto market rolls back in light of new US regulations and growing risk sentiment. The U.S. Securities and Exchange Commission (SEC) has enforced actions against the Kraken crypto exchange this Thursday, Feb 9.
The SEC accuses the crypto exchange of violating U.S. securities law. The SEC complained that Kraken didn’t register its services, which include offering and selling crypto assets via the staking-as-a-service program. The Commission classifies crypto assets as securities considering Kraken’s staking services as illegal.
The SEC clarifies that the crypto exchange promised its American clients the excessive profits in its advertising that are inconsistent with the economic reality. Per the Commission, US clients’ tokens are under the risks with little-to-no protection on behalf of the company. The SEC’s Division of Enforcement director, Gurbir Grewal, says Kraken provided “zero insight” into its financial conditions and capabilities to pay out the returns.
Kraken is about to pay a $30 million fine and stop its staking operations in the US. The company has an agreement with the Commission within the country but says to continue providing staking services to non-American clients via other subsidiaries.
The reason for such measures is the SEC’s priority to regulate crypto more this year. Previously the Commision was in charge of inspecting crypto firms concerning risk and compliance. In 2023, they aim to focus on what services crypto firms offer US clients and customer protection related to it. The trend is clear after many bankruptcy filings made in 2022 (e.g., Genesis, FTX, and others.)
The crypto prices consequently fell as panic is spreading further in anticipation of a possible staking ban and other regulatory measures.
By numbers, BTC dropped back to 21k (or over 3.5%) dragging other coins down too. The crypto market capitalization is at 1.02 trillion, falling by 3.61% during the day. Still, the volume has increased by 15.96% reaching 73.95 billion US dollars.
The Kraken competitors are thriving: the token prices of the decentralized staking providers have skyrocketed. Lido DAO (LDO) and Rocket Pool (RPL) are surging by 25% and 30%.
Talking about crypto regulations in other countries, the process is going on. For instance, Dubai is creating rulebooks on compliance standards, advertising, and issuance. The UK has developed a regulatory framework to align crypto money processing with the TradFi assets (i.e., stocks, bonds.) And Australia is reforming its laws to improve customer protection in the cryptocurrency market.
