The Kraken exchange under the scrutiny of the American SEC. Is there a similar scenario to Ripple?
American financial supervision is investigating the case of a well-known cryptocurrency exchange.
The American Securities and Exchange Commission should finally launch a branch dedicated to companies strictly from the cryptocurrency sector, as we constantly receive reports that the SEC is inconsistently conducting investigations against many of them. This round was unlucky for the Kraken exchange, which is being investigated by the institution for alleged violations of securities offering laws.
Kraken under SEC scrutiny
According to Bloomberg in its report of February 8, the US Securities and Exchange Commission is investigating the offers that the cryptocurrency exchange Kraken made to its customers in the US. However, no information was provided about the exact offers.
A spokesperson for the committee declined to comment extensively on the matter, stating only:
– The SEC will not comment on the existence or non-existence of a possible investigation.
Gary Gensler, the chairman of the commission, announced in December that his main goal in terms of cryptocurrency regulation for this year is to bring cryptocurrency exchanges and lending platforms into operation in accordance with US law. However, this situation may happen soon, through the forced inspection of companies by the SEC or through enforcement actions.
Returning to the Kraken exchange itself, in September its CEO - Dave Ripley - claimed that he did not see the need to register his company as an exchange with the SEC. He argued that Kraken does not offer securities. Moreover, as Ripley reported, "there are no such tokens on the market that would be securities that we would be interested in as an exchange."
What is a security and what is not?
However, here comes confusion and a lot of unclear issues, because Gary Gensler has repeatedly declared that he views most digital assets other than Bitcoin as securities, and therefore they should all be subject to SEC scrutiny.
Recently, however, the committee at one point made a concession during the January 30 appeal hearing in the case of LBRY v. SEC. The battle was that the sale of tokens from LBRY Credits (LBC) on the secondary market did not constitute collateral. The judge in the case ultimately sided with the cryptocurrency company after attorney John Deaton argued that the courts had never recognized the underlying asset as collateral in similar cases.
Regulators often use the "Howey test" to determine whether a financial instrument is a security or financial collateral. The name of this method refers to the SEC case against W. J. Howey Co. from 1946. This court case set a precedent in the United States for what types of transactions are considered securities and which are not.
It was then found that the transaction qualifies as an investment arrangement, i.e. it is considered a hedge, in the case of an investment in a joint venture with profits obtained solely through the work of others.
