Regulation
Crypto exchange Kraken opposes SEC
The crypto exchange’s legal team Kraken urged a court to reject the SEC’s requests, arguing they could lead to a “significant overhaul” of the American financial regulatory system.
At the center of the issue is the debate over the jurisdiction of the SEC regarding the cryptocurrencies listed by Kraken. Let’s see all the details below.
Crypto news: Kraken says SEC demands could destabilize entire financial system
As expected, Kraken, a crypto exchange, has asked a US court to dismiss to requests from the Securities and Exchange Commission (SEC).
Arguing in particular that they could cause a “significant reshuffle” of the financial regulatory framework in the United States.
Kraken’s request, filed in the Northern District Court of California, follows the SEC’s subpoena issued last November.
The company accused the exchange of failing to register as a broker, clearing house or exchange.
The SEC had launched its legal action against Kraken a few months after resolving a previous case related to the exchange’s staking activity.
In February 2024, Kraken moved to dismiss the SEC lawsuit, arguing that the cryptocurrencies mentioned in the accusation must be considered basic products rather than titles.
However, last month the SEC filed a 39 page response to Kraken’s motion to dismiss, arguing that the enforcement measures clearly fall within its jurisdiction, as established by Congress.
Jurisdiction and regulation: the dispute between Kraken and the SEC
The SEC document, filed in April, says the agency was created to enforce securities laws and Exchangesincluding registration requirements for securities intermediaries.
The SEC claims to follow its mandate by applying the Howey test, which determines what constitutes a title. This is based on four criteria: an investment of money in a joint enterprise, with the expectation of profits generated by the efforts of others.
The SEC rejects the idea that it would assume new powers and emphasizes that Congress does not need to pass specific laws for each new technology.
Kraken’s lawyers responded that the SEC was unable to meet the additional criteria of the Howey test.
In particular, arguing that their case could lead to an undue expansion of the SEC’s jurisdiction, transforming activities that were never subject to its authority into objects of regulation.
Such a radical change in regulatory structure, they say, should be discussed in Congress and not decided by the courts. Judge William H. Orrick is tasked with examining the matter on June 12.
Kraken expands in Germany: partnership with DLT Finance
Kraken recently announced a new collaboration to serve its customers in Germany, expanding its presence in European markets.
The partnership was established with DLT Finance, a company authorized by BaFin, through its brands DLT Securities GmbH and DLT Custody GmbH. This agreement aims to facilitate access to digital assets for German users.
Germany and Europe have become epicenters of cryptocurrency adoption, with several German cities showing interest in cryptocurrency halving. Bitcoin (BTC) and the crypto banking sector dominated by European providers.
David Ripley, The Kraken CEO highlighted that more than 5% of Germans own crypto assets, highlighting the growing demand in the country:
“Through this partnership, German customers have access to cryptocurrencies with the certainty of trading with the best deal as Germany transitions to a new pan-European regulatory framework.”
The collaboration comes against a backdrop of regulatory developments in the European Union, with the introduction of the Crypto Asset Markets Regulation (Mica), which provides a detailed framework for digital asset service providers.
After three years of development, MiCA establishes rules for the issuance of stablecoins and reserve requirements. Full implementation of the new rules is expected by December.
This new agreement follows other initiatives by Kraken to expand in Europe.
Including the acquisition of the Dutch cryptocurrency broker Coin Meester BV and the approval of the electronic money institution by the Irish central bank, allowing the exchange to operate in different countries, including Ireland, Italy, Spain and Belgium.