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Cryptocurrency exchange Kraken files opposition to SEC
The legal team of the cryptocurrency exchange Kraken urged a court to reject the SEC’s requests, arguing they could lead to aa “significant revision” of the US financial regulatory system.
At the heart of the matter is the debate over the SEC’s jurisdiction over cryptocurrencies listed by Kraken. Let’s see all the details below.
Crypto News: Kraken Claims SEC Inquiries Could Destabilize Entire Financial System
As anticipated, Kraken, a cryptocurrency exchange, has asked a US court to do so dismiss Securities and Exchange Commission (SEC) requests.
Claiming 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, comes in response to the SEC subpoena issued last November.
The company accused the exchange of failing to register as a broker, clearing house or exchange.
The SEC had initiated its own legal action against Kraken just months after settling a previous case related to the exchange’s staking activity.
In February 2024, Kraken asked to dismiss the SEC lawsuit, arguing that cryptocurrencies mentioned in the indictment should be taken into consideration raw material rather than titles.
However, last month, the SEC filed a 39 page response to Kraken’s motion to dismiss, arguing that the enforcement action clearly falls 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 obligations for securities intermediaries.
The SEC says it follows its mandate by applying the Howey test, which determines what constitutes a guarantee. This is based on four criteria: An investment of money in a joint venture, with the expectation of profits generated by the efforts of others.
The SEC rejects the idea of taking on new powers and emphasizes that Congress does not need to enact specific laws for every new technology.
Kraken’s lawyers responded that the SEC is 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 have never been subject to its authority into regulatory objects.
Such a radical change in the regulatory structure, they say, should be debated in Congress and not decided by the courts. Judge William H. Orrick is set to look into the matter on June 12.
Kraken expands into Germany: partnership with DLT Finance
Kraken recently announced a new collaboration to serve customers in Germany, expanding its presence in European markets.
The partnership 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 resources for German users.
Germany and Europe have become the epicenters of cryptocurrency adoption, with several German cities showing interest in halving Bitcoin (BTC) and the crypto banking sector dominated by European providers.
David Ripley, Kraken’s CEO highlighted that over 5% of Germans own crypto assets, underlining the growing demand in the country:
“With this partnership, German customers gain access to cryptocurrencies with the confidence of trading with a best-in-class offering as Germany transitions to a new pan-European regulatory framework.”
The collaboration is part of a context of regulatory evolution in the European Union, with the introduction of the Markets in Crypto Assets Regulation (Not), which provides a detailed framework for digital asset service providers.
After three years of development, MiCA establishes the rules for stablecoin issuance 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 several countries, including Ireland, Italy, Spain and Belgium.