US Senator Cynthia Lummis has recently criticized the United States Securities and Exchange Commission (SEC)’s regulatory approach over Kraken, the San Francisco-based cryptocurrency exchange, without clear crypto rules.
US Senator’s Critics Toward The SEC Approach Over Kraken
On Monday, November 20, the United States Securities and Exchange Commission (SEC) filed a lawsuit against the US-based crypto exchange Kraken for allegedly operating an unregistered trading platform for cryptocurrency assets. The lawsuit claims that Kraken took advantage of trading revenue and significant fees without following securities regulations that are made to safeguard investors.
According to the SEC claims, Kraken‘s internal controls and policies permitted the exchange to mix $33 billion in client assets with its own, thereby endangering users. However, the crypto exchange has asserted that they intend to fight the SEC’s claims in court.
“Today, the SEC filed a complaint alleging that Kraken operates as an unregistered securities exchange, broker, and clearing house. We disagree, and intend to vigorously defend our position in court,” the exchange stated.
Following this, US Senator Cynthia Lummis has expressed her displeasure over the SEC’s securities scrutiny of the crypto exchange. The senator took to X (formerly Twitter) to share her criticism over the SEC’s move.
According to her, the SEC came after the crypto exchange without explicit cryptocurrency rules. In addition, she highlighted the necessity of precise regulatory jurisdiction as opposed to enforcement efforts that harm consumers unnecessarily.
Furthermore, the senator has called on Congress to produce precise rules for the SEC on what is a security asset and what is a commodity asset. She then asserted that the Lummis-Gillibrand firm tends to support financial innovation in the United States.
The SEC cannot continue ruling by enforcement. Crypto asset companies have repeatedly tried to get guidance from the SEC only to be hit with enforcement actions, causing unnecessary harm to consumers. It is time for Congress to pass a regulatory framework to provide clear rules to the SEC on what is a security and what is a commodity. The Lummis-Gillibrand Responsible Financial Innovation Act will rein in the SEC and allow financial innovation to thrive in the United States.
The dispute between the SEC and Kraken raises questions about more general issues facing the sector. Crypto companies that seek advice risk enforcement, which puts customers in a fuzzy area. The Senator’s proposal for more specific restrictions demonstrates increased urgency for organized crypto legislation.
Significance Of The SEC’s Complaint
According to a blog post by the crypto exchange, the SEC’s complaint toward Kraken claims no fraud, no market manipulation, no customer losses, and no hacking, among others. Although large sums of money were mentioned, it doesn’t claim that any of them have been lost or abused.
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Rather, the complaint presents a technical rationale that Kraken’s firm needs specific securities licenses to operate. This is because the digital assets the crypto exchange provides are essentially investment contracts.
However, according to the exchange, this is incorrect, false, and disastrous in several areas. “This is incorrect as a matter of law, false as a matter of fact, and disastrous as a matter of policy,” the company stated.