Bitcoin (BTC) is dropping in price amid news that the U.S. Securities and Exchange Commission (SEC) has launched a probe into Kraken over whether it illegally traded unregistered securities.
According to Bloomberg, the SEC is investigating Kraken, the third largest crypto exchange in the world, for possibly breaking securities rules when offering certain products to those living in the United States.
Bitcoin is worth $22,596 at time of writing, down more than 3.5% from its high the day before the report was published.
Per the report, the investigation may be nearing a close with a possible settlement coming within days. Which tokens or other products sparked the SEC probe remains unknown.
The US-based exchange offers clients about 185 different cryptocurrencies to invest in, as well as the opportunity to stake their holdings for rewards.
Bloomberg predicts any settlement would have broader ramifications for the crypto sector.
Says the report,
“A settlement with the SEC could pressure other crypto firms to hash out deals with the regulator, which has repeatedly said most of the tokens being offered are securities that should be subject to the agency’s rules.”
After FTX’s implosion in November, SEC chair Gary Gensler said his agency would become more aggressive in enforcement against crypto firms that have not registered with the SEC.
Meanwhile, the head of US-based crypto exchange Coinbase, Brian Armstrong, is criticizing any potential move by the SEC to crack down on crypto staking.
“We’re hearing rumors that the SEC would like to get rid of crypto staking in the US for retail customers. I hope that’s not the case as I believe it would be a terrible path for the US if that was allowed to happen.”
Armstrong says staking is vital to the crypto sector.
“Staking is a really important innovation in crypto. It allows users to participate directly in running open crypto networks. Staking brings many positive improvements to the space, including scalability, increased security, and reduced carbon footprints.”
He also says that the SEC should not consider staking a security and that the federal agency should adopt rules that promote the crypto sector, otherwise he says exchanges will leave the US.
“We need to make sure that new technologies are encouraged to grow in the US, and not stifled by lack of clear rules. When it comes to financial services and web3, it’s a matter of national security that these capabilities be built out in the US.
Regulation by enforcement doesn’t work. It encourages companies to operate offshore, which is what happened with FTX.
Hopefully, we can work together to publish clear rules for the industry, and come up with sensible solutions that protect consumers while preserving innovation and national security interests in the US.”
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