SEC Sues Kraken in Regulatory Crackdown on Crypto

The Securities and Exchange Commission (SEC) recently filed a lawsuit against Kraken, a popular cryptocurrency exchange. This legal action is part of the U.S. government's ongoing efforts to regulate the crypto industry. Despite the lawsuit, Bitcoin's price remains unaffected, as investors hold onto hopes of a more favorable SEC stance towards cryptocurrencies.

Allegations Against Kraken

The SEC claims that Kraken has been operating as an unregistered securities exchange, broker, dealer, and clearing agency. Since 2018, the exchange allegedly made hundreds of millions of dollars by facilitating the trading of crypto asset securities. These charges are similar to the ones previously imposed on Coinbase Global earlier this year, further highlighting the SEC's scrutiny of crypto exchanges.

Additionally, the regulator accuses Kraken of commingling customer funds with its own. This includes using client cash to cover its operational expenses directly. The accusation strikes a chord within the crypto community, as commingling was at the center of FTX's collapse over a year ago, causing significant market turmoil.

Kraken's Response

In response to the SEC's complaint, Kraken firmly denies the allegations. The exchange asserts that it does not list securities and intends to vigorously defend its position. Kraken also points out that the SEC has repeatedly urged crypto exchanges to register without any legal basis for its demand or a clear path to registration in place.

Regarding the issue of commingling, Kraken clarifies that the SEC has not alleged any missing customer funds. The exchange highlights that the true focus of these charges revolves around the broader question of whether digital assets should be classified as securities.

As this legal battle unfolds, the outcome will have significant implications for the crypto industry and regulatory landscape in the United States.

The Price of Bitcoin Holds Steady as Crypto Regulation Continues

The price of Bitcoin has remained steady, experiencing a minor decrease of less than 1% over the last 24 hours, currently sitting at $37,250. Despite this small dip, Bitcoin is still near its recent peak of around $38,000, which was achieved last week. This peak represents the highest level Bitcoin has reached since the crypto market experienced a significant bear market in May 2022.

Yuya Hasegawa, an analyst at crypto exchange Bitbank, noted that the upside potential for Bitcoin has been limited by the psychological resistance at the $38,000 level. In order for Bitcoin to surpass this level, it requires a significant catalyst to drive further growth.

Bitcoin has witnessed a strong rally of over one-third since early October, breaking free from a period of relatively calm trading in the crypto market. This surge can largely be attributed to hopes that the Securities and Exchange Commission (SEC) will soon approve the first spot Bitcoin exchange-traded fund (ETF). The introduction of such funds is expected to bring in a fresh wave of interest from both individual and institutional investors. However, the approval ultimately hinges on the green light from the regulatory body.

The recent actions taken by the SEC against Kraken serve as a clear indication that regulatory pressures on the crypto industry are far from over. The continued adversarial stance of the agency towards crypto market participants may pose risks to Bitcoin's ongoing rally, which heavily relies on the possibility of favorable ETF approvals from the SEC.

In addition to Bitcoin, Ether, the second-largest cryptocurrency, experienced a 1% decrease, currently trading at $2,000. Altcoins and smaller cryptocurrencies also witnessed a reversal in their earlier outperformance, with Cardano dropping by 4% and Polygon plunging by 8%. Even meme-based tokens were not exempt from this downturn, with Dogecoin falling 5% and Shiba Inu shedding 4%.