In the wake of the historic settlement between the U.S. Department of Justice (DOJ) and Binance, one of the world’s largest cryptocurrency exchanges, Jesse Powell, co-founder of Kraken, a major rival exchange, has commented on the state of the cryptocurrency industry. Powell’s remarks come shortly after the U.S. Securities and Exchange Commission (SEC) filed a fresh lawsuit against Kraken, raising concerns about the reputation and regulatory challenges facing the crypto market.
Kraken’s long-term perspective amidst regulatory challenges
Jesse Powell, in a post on X, expressed Kraken’s commitment to the cryptocurrency industry’s long-term success despite the regulatory hurdles it faces. He acknowledged that recent developments, including the DOJ’s settlement with Binance, have contributed to a perception that the industry is becoming fairer. The settlement requires Binance to pay a substantial $4.3 billion fine, marking a significant enforcement action by U.S. authorities against a major crypto exchange.
Powell addressed questions raised by shareholders over the past year, primarily concerning the rapid growth of cryptocurrency exchanges and their apparent ability to operate without significant regulatory consequences. He highlighted the challenges faced by “good guys” in the industry while market share dwindles.
Powell emphasized the importance of self-policing within the cryptocurrency industry as dodgy operations and illicit activities continue to emerge. He noted that such incidents provide opportunities for governments to impose stricter regulations on cryptocurrencies and tighten their grip on the market. Powell’s comments reflect a growing awareness within the industry that regulatory compliance and ethical conduct are crucial to its long-term sustainability.
Kraken, Coinbase, and Ripple as “Easy Targets” for the SEC
In his post, Powell also discussed the SEC’s approach to enforcement, suggesting that Kraken, Coinbase, and Ripple are perceived as “easy targets” by the regulatory authority. He pointed out that these firms are situated within the SEC’s jurisdiction, making them more accessible targets compared to offshore offenders. Powell implied that the SEC’s actions might not necessarily prioritize protecting investors but instead focus on pursuing cases that are within their immediate reach.
He referenced the SEC’s previous legal action against Kraken’s parent entities, which resulted in a settlement involving a $30 million payment for charges related to the offer and sale of a crypto asset staking-as-a-service program. Powell criticized the SEC’s tactics, suggesting that this settlement merely delayed further regulatory scrutiny and that a substantial legal battle could cost crypto companies much more than $30 million, both financially and in terms of time.
Kraken Challenges SEC’s legal argument
Kraken, in a separate blog post earlier in the week, challenged the SEC’s legal arguments in the lawsuit. The exchange asserted that the SEC’s claim that its products constituted investment contracts was legally unsound and factually incorrect. Kraken contended that there is no existing law supporting the SEC’s position, describing the allegation as hollow and arguing that the regulatory body is demanding compliance with a non-existent regulatory framework.
The exchange further criticized the SEC’s approach, stating that there is no defined category for investment contracts within the existing regulatory framework for cryptocurrency exchanges, broker-dealers, or clearing agencies. Kraken’s stance highlights the ongoing legal disputes between cryptocurrency exchanges and regulatory authorities over the interpretation of existing securities laws in the context of the evolving crypto industry.