Kraken exchange being probed by SEC, major announcement may come today
(Kitco News) - Kraken, the third largest cryptocurrency exchange in the world by volume, is being investigated by the Securities and Exchange Commission (SEC) according to a Bloomberg report published Wednesday, and it might be the subject of a major SEC announcement later on Thursday.
The SEC probe is aimed at determining whether the San Francisco based exchange offered unregistered securities to its U.S. customers. According to the inside source quoted in the report, the investigation “is at an advanced stage” and there could be a settlement in the coming days.
While the report doesn’t specify which financial products the regulator is scrutinizing, SEC Chair Gary Gensler has said on multiple occasions that he considers most tokens to be securities, and Kraken offers over 180 of them.
In a 2022 insider trading case against Kraken competitor Coinbase, the SEC named nine digital assets it considered securities: AMP (AMP), Rally (RLY), DerivaDEX (DDX), XYO (XYO), Rari Governance Token (RGT), LCX (LCX), Powerledger (POWR), DFX Finance (DFX), and Kromatika (KROM).
On Sept. 22, Kraken’s incoming CEO Dave Ripley said the exchange had no plans to delist tokens the SEC labeled as securities, or to register with the agency as a market intermediary. This likely did not sit well with Gensler, who told Bloomberg in December that “the runway is getting shorter” for crypto firms to register with the agency.
According to FOX Business journalist Eleanor Terrett, Kraken might be the subject of a major SEC announcement later today. Terrett tweeted late yesterday evening that an inside source told her something big was in the works at the regulator:
??SCOOP: My @SECGov sources tell me to be prepared for a potentially big announcement tomorrow. Could it have something to do with a @krakenfx settlement following a closed meeting at 2pm? Could settlement terms have industry ramifications? We’ll see. ????https://t.co/AVy0O5dsIG— Eleanor Terrett (@EleanorTerrett) February 9, 2023
The Kraken exchange processes around $660 million in transactions each day, around 40% of the $1.6 billion in daily volume processed on number two exchange Coinbase, which is also based in the United States. Both are dwarfed by the over $23 billion in daily volume of Binance, which has moved into a near-monopolistic position among exchanges following the collapse of erstwhile number two FTX in November.
On Dec. 28, Kraken announced that it would be leaving the Japanese market, saying that the combination of a weak global crypto market and challenging market conditions in Japan itself “mean the resources needed to further grow our business in Japan aren’t justified at this time.”
And on Nov. 28, the United States Treasury’s Office of Foreign Assets Control (OFAC) announced a settlement with Kraken for “apparent violations of sanctions against Iran.” Kraken agreed to pay $362,158.70 to settle its potential civil liability and was also required to invest an additional $100,000 “in certain sanctions compliance controls.”