Cryptocrackdown exposes infighting in the US SEC
Following the settlement reached by Kraken and its subsidiaries Payward Ventures and Payward Trading with the Securities Exchange Commission (SEC) on February 9, covered by Bitcoinist, Commissioner Hester M. Pierce stated in a report that she disagreed and disagreed with the closure of the crypto exchange’s stake program.
The regulator argued that this betting program should have been registered with the SEC as a securities offering. SEC Commissioner Pierce, also known as “Crypto Mom,” argues whether registration would be possible in the current crypto-related climate:
An offering like the staking service in question here raises a number of complicated questions, including whether the staking program as a whole would be registered or whether each token’s staking program would be registered separately, what the important disclosures would be, and what the accounting implications would be for Kraken.
Solution or poor judgment by the SEC?
The commissioner stated that the SEC has been aware of the betting programs for an extended period of time. Therefore, she suggests that the SEC should have set guidance for the stake programs “long before this situation exploded the way it did.” The commissioner added:
Instead of thinking through enforcement programs and issuing guidance, we again chose to talk through an enforcement action, purportedly to “make clear to the market that staking-as-a-service providers must register and provide full, fair and truthful disclosure and investor protection.
Pierce states that using enforcement actions to inform people of what the law is in an emerging industry is “not an efficient or fair way to regulate.” For the commissioner, one-off enforcement actions and “cookie-cutter” analysis do not provide a solution for crypto investors in the United States.
Most worryingly, however, our solution to a registration breach is to completely shut down a program that has served people well.
Kraken’s betting program will no longer be available in the US, registered or not, Kraken is banned by the SEC from ever offering a betting service in the US Commissioner Piers calls the recent settlement from the SEC a “paternalistic and lazy regulator that instead of providing a solution , it just turns it off.”
The SEC is not the only institution that has taken hostile action against the crypto industry in recent months. For this reason, the SEC has been dealing with criticism from the US Senate since October 2022, claiming that the SEC chairman has overstepped his authority and taken a hostile stance towards the financial industry.
The SEC has recently experienced an exodus of employees that drew the attention of the Senate, which sent a letter demanding to know why employees are leaving the nation’s corporate watchdog at the fastest rate in 10 years.
The letter issued and signed by 12 Senate Republicans referred to a public report of the SEC on Oct. 13 from the Office of the Inspector General detailing staff attrition and reports of dissatisfaction within the SEC.
According to the Inspector General report at the time, the SEC has been losing employees at a rapid rate over the past ten years. This data and the statements made by Commissioner Peirce enforced the idea that there is internal turmoil within the regulator, specifically regarding the crypto industry and how to regulate it.
The market has reacted to the SEC settlement with Kraken with a retracement in the most prominent cryptocurrencies on the market. Bitcoin is currently trading at $21,600. It has fallen 3.9% in the last 24 hours and 7.8% in the last seven days.
Bitcoin lost the critical support level of $22,000 and is set to test the next support level remaining at $21,500. If it fails to hold the nearest support, it may continue to pull back to the $20,000 area.
Feature image from Unsplash, chart from TradingView.
