WASHINGTON – Kraken, one of the world’s largest cryptocurrency exchanges, is embroiled in a probe by a top US financial regulator over whether it broke securities rules related to certain offerings to American clients, according to a person with knowledge of the matter.
The United States Securities and Exchange Commission (SEC) probe into whether Kraken offered unregistered securities is at an advanced stage and could lead to a settlement in the coming days, said the person. It is not immediately clear which tokens or offerings are drawing scrutiny.
Any action against Kraken could have significant ramifications for the industry, which is already facing sharp scrutiny in Washington after FTX’s collapse late last year. 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.
SEC chair Gary Gensler told Bloomberg in December that “the runway is getting shorter” for crypto firms to register with the agency.
SEC probes do not always lead to enforcement action, but can result in firms and individuals paying fines and facing other penalties.
San Francisco-based Kraken is the world’s No. 3 cryptocurrency exchange, with a daily trading volume of roughly US$650 million (S$860 million) globally, according to CoinMarketCap. On its website, the company says it supports more than 185 cryptocurrencies, although it is not clear how many are available to US clients to trade.
Users can also earn rewards on certain holdings through a process known as staking.
Kraken reached an unrelated settlement with the Treasury’s Office of Foreign Assets Control late last year over allegations that it violated US sanctions against Iran. The company agreed to pay a little over US$360,000 as part of the deal and to invest US$100,000 in sanctions compliance.
The SEC also has an open investigation into one of Kraken’s competitors, Coinbase Global, over its token listings.
The agency has not accused Coinbase directly of offering unregistered securities but did identify several tokens listed on the exchange as securities in a lawsuit against a former Coinbase employee and two others as part of an insider trading case.
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