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SEC charges Kraken for operating as an unregistered securities exchange

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Re: SEC charges Kraken for operating as an unregistered securities exchange

#171

Post by b112 »

legutierr wrote: post #161
jcranmer wrote: post #73

Earlier quoted context omitted.

Matt Levine I think put it best: if Bernie Madoff were to go to the SEC and ask them "I don't know how to run a Ponzi scheme legally, can you please update the guidelines to make it easier", of course the SEC is going to refuse. And the situation with cryptocurrencies seems to be broadly similar: there's actually a pretty clear answer as to what would need to be done to be fully above-the-board and legal, it's just n…

> And given that we've seen exchange after exchange fail to perform basic tasks like "don't commingle customer funds," I have a hard time feeling any sympathy for cryptocurrency companies here. There is nothing per se nefarious about co-mingling customer funds, provided that you are otherwise compliant with the law. Banks, for instance, don't just co-mingle customer funds, they invest those funds on their own behalf…

Kraken has been operating under the money transmitter licensing scheme for a decade, and like banks, money transmitters don't have any legal requirement to segregate customer funds—although they do have the responsibility to maintain sufficient cash balances or liquid investments to cover all of what they owe to customers.

I think you meant to say here and unlike banks, because banks absolutely do not need to have sufficient funds to cover all customer's savings.

Unless.. are things different in the US? It's been a decade since I've read the Bank Act (Canadian), and when I did, only 5% of customer's account holdings were required to be held in tangible assets (gold, cash, etc), and inspected yearly by the Minister of Finance.

And I believe even that requirement has been dropped.

Re: SEC charges Kraken for operating as an unregistered securities exchange

#172

Post by palmfacehn »

cool_dude85 wrote: post #166
palmfacehn wrote: post #158

Earlier quoted context omitted.

You have presented false alternatives. Private regulation can exist inside of a free market. Consumers and producers of food or financial products can voluntarily participate with private ratings agencies. These standards can be higher or lower, based upon market preferences. The existence of a state backed monopoly is widely recognized as prohibitive to competition. State monopolies create issues around corruption,…

Why's it surprising to see anti-market sentiment when we've been given a very clear look at how the free market has operated in the crypto space sans government regulation? The whole ecosystem has been dominated by grifts, outright scams, rug pulls, ponzis, unregulated gambling, etc. etc. with no end in sight. Why didn't the free market step up?

It is surprising to see these sentiments on a site ostensibly for entrepreneurs and builders.

If you'd prefer a centrally planned and regulated economy, that is a different discussion. From my side, I believe you should enjoy your views and the living situation which accompanies it.

Not interested in arguing the virtues of either approach here. Taking exception with the inaccurate characterizations is as far as I go. If you believe an economy driven by central bank policy is a free-market, I'm not sure there's much more we can say here.

Re: SEC charges Kraken for operating as an unregistered securities exchange

#173

Post by discodave »

westurner wrote: post #108
hanniabu wrote: post #54

Earlier quoted context omitted.

The Coinbase Wells letter was in reference to their interest bearing offerings

Presumably Coinbase and Kraken had to register as banks to offer FDIC-insured accounts (and debit cards)? Non-Security Deposits are interest-bearing products that are not securities. Non-Security Deposits: CD Certificates of Deposit, MMA Money Market Accounts, Treasury Bills, Savings accounts, Checking Accounts Do banks require SEC registration to offer interest-bearing Non-Security Deposit products? Have banks ever…

Coinbase and Kraken are not registered as banks, and do not offer FDIC insured accounts.

> Do banks require SEC registration to offer interest-bearing Non-Security Deposit products?

No, because they are registered and regulated as banks.

Re: SEC charges Kraken for operating as an unregistered securities exchange

#174

Post by b112 »

kadoban wrote: post #68
ascendantlogic wrote: post #65

I feel like this won't end up going well for the SEC. This whole methodology of telling exchanges "I don't know, you figure it out" when they ask for clarity and then turning around and suing them for not figuring it out is extremely shaky legal ground.

Law enforcement has no obligation to explain the laws to you.

Law enforcement has no obligation to explain the laws to you.

One aspect of common-law, is that it is law that is equally applied to all. The logic is, if Bob did thing $x, and Sally did thing $x, both should expect a similar outcome.

This is because a person has a right to know how specific acts are interpreted by courts, for whatever legislation is being tried against. A person has a literal right in common-law, pre-dating most modern democracies, to know how a thing they do will be interpreted.

And this is why most descendants of common-law legal systems, such as the US, put such strong strictures on prior judgements. It's vital. It's missed by many, but this is how people know how the law will be interpreted.

And my point in all of this is, yes, 100%, under common-law, someone has to give you an idea of how your actions will be interpreted. It's core to common-law, and US law, is predicated upon common-law, criminal or civil.

"Ignorance of the law is no excuse", however, that does not remove the right to be informed of the law when asked!

(Let's not dive into the few places that have napoleonic civil code in the US, and stick to federal law at least)

Re: SEC charges Kraken for operating as an unregistered securities exchange

#175

Post by oblio »

palmfacehn wrote: post #172
cool_dude85 wrote: post #166

Earlier quoted context omitted.

Why's it surprising to see anti-market sentiment when we've been given a very clear look at how the free market has operated in the crypto space sans government regulation? The whole ecosystem has been dominated by grifts, outright scams, rug pulls, ponzis, unregulated gambling, etc. etc. with no end in sight. Why didn't the free market step up?

It is surprising to see these sentiments on a site ostensibly for entrepreneurs and builders. If you'd prefer a centrally planned and regulated economy, that is a different discussion. From my side, I believe you should enjoy your views and the living situation which accompanies it. Not interested in arguing the virtues of either approach here. Taking exception with the inaccurate characterizations is as far as I go.…

Ummmm... You live in a regulated economy.

Even the US economy is a capitalist system with government intervention.

Re: SEC charges Kraken for operating as an unregistered securities exchange

#176

Post by dleavitt »

cool_dude85 wrote: post #166
palmfacehn wrote: post #158

Earlier quoted context omitted.

You have presented false alternatives. Private regulation can exist inside of a free market. Consumers and producers of food or financial products can voluntarily participate with private ratings agencies. These standards can be higher or lower, based upon market preferences. The existence of a state backed monopoly is widely recognized as prohibitive to competition. State monopolies create issues around corruption,…

Why's it surprising to see anti-market sentiment when we've been given a very clear look at how the free market has operated in the crypto space sans government regulation? The whole ecosystem has been dominated by grifts, outright scams, rug pulls, ponzis, unregulated gambling, etc. etc. with no end in sight. Why didn't the free market step up?

Not to mention the innovations that voluntary regulatory standards plus enlightened self-interest have enabled in the manned submersible space.

Re: SEC charges Kraken for operating as an unregistered securities exchange

#177

Post by oblio »

foooobaba wrote: post #100
pmulard wrote: post #94

Earlier quoted context omitted.

The FDA has no place in a free market. If people trust a company which poisons their food, they should be punished for misplacing their trust. Both the scammer and the scammed deserve a share of the punishment. Life naturally punishes the scammed already and teaches them a lesson at the same time... Without the help of the FDA... How good is that?! -- I'd much rather pool our money into a commission that does this fo…

I am also glad the FDA protects us from chemicals and ingredients that would cause processed food to be unhealthy and harmful, if they didn’t do that we would probably end up with an overweight population and tons of food related health problems.

That's the industry lobbying to prevent beneficial regulation for consumers so you're kind of making the opposite point to what you meant, I think.

Re: SEC charges Kraken for operating as an unregistered securities exchange

#178

Post by arctek »

ascendantlogic wrote: post #65

I feel like this won't end up going well for the SEC. This whole methodology of telling exchanges "I don't know, you figure it out" when they ask for clarity and then turning around and suing them for not figuring it out is extremely shaky legal ground.

I also don't think this will work for them in the context of the Ripple case they just lost - and decided to not appeal - as this will be referenced as part of Kraken's defense. It'd be very different if the SEC maintained a list of even examples of tokens that are/aren't compliant and a straightforward registration process with active registrants. The fact that neither of these exist but the SEC likes to pretend they do isn't working in their favour. There is no such thing as a 'registered securities exchange' for cryptocurrency, so how can they be at fault (note its unregistered, not illegal is the allegation).

Re: SEC charges Kraken for operating as an unregistered securities exchange

#179

Post by przeor »

discodave wrote: post #170
legutierr wrote: post #161

Earlier quoted context omitted.

> And given that we've seen exchange after exchange fail to perform basic tasks like "don't commingle customer funds," I have a hard time feeling any sympathy for cryptocurrency companies here. There is nothing per se nefarious about co-mingling customer funds, provided that you are otherwise compliant with the law. Banks, for instance, don't just co-mingle customer funds, they invest those funds on their own behalf…

> For what its worth, banks don't just co-mingle customer funds, they invest those funds on their own behalf and reap the profits for themselves. And that is why banks are regulated, must register, follow certain rules etc. > Kraken has been operating under the money transmitter licensing scheme for a decade Yeah, but that doesn't give them a license to operate a securities exchange, or a bank. How many other money t…

[flagged]

Re: SEC charges Kraken for operating as an unregistered securities exchange

#180

Post by toenail »

donmcronald wrote: post #159
TacticalCoder wrote: post #104

Earlier quoted context omitted.

My favorite part is this: > Meanwhile, groups of lawmakers from both sides of the aisle have questioned what they call SEC’s “regulation via enforcement” approach. They have asked why the agency’s actions against crypto firms seem less focused on “compliance and customer protection,” but were instead “calculated for maximum publicity and political impact.” Others have observed that the SEC’s strategy “does not protec…

> “calculated for maximum publicity and political impact.” I'm not a fan of crypto currency, but a big part of my dislike for it is how difficult it is to actually use it. I don't mean technically though. I mean legally. In Canada, all crypto transactions are considered taxable events. Did you sell a couch on Facebook Marketplace using Bitcoin? Time to calculate your capital gain or loss from a vaguely worded set of…

It sounds wonderful when the biggest worry you have about money is how to file your taxes. If that were true for most people on this planet bitcoin would probably not be needed.
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