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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

#211

Post by RandomLensman »

palmfacehn wrote: post #158
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…

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,…

There are no free markets in human societies. You can pick your trade-offs, that's it. Privatly regulated markets can fail, goverment regulated markets can fail.

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

#212

Post by cft »

ChadNauseam wrote: post #165
cft wrote: post #49

Earlier quoted context omitted.

Also Ethereum switched to proof of stake. Which means that the "stakeholders" (shareholders) are voting what transactions go into the ledger. Bitcoin is proof of work still.

A majority of bitcoin miners can also prevent transactions from entering the ledger at cost to themselves, just like Ethereum stakers. It's a misconception that Ethereum works via stakers voting the way people normally think of voting.

The point is that majority mining is disassociated with the majority ownership of the underlying crypto in the pow case

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

#213

Post by pavlov »

AnthonyMouse wrote: post #184
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…

> 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. The actual problem is that no part of the government wants to be the one to tell you if something is legal, because whoever actually makes the decision takes the blame for the consequences one way or the other. So Congress…

> “Somebody should have to officially tell you if you're allowed to do something or not, ahead of time.”

And how would this process actually work in practice?

Would making such a request be free? Probably not, since they would consume a lot of lawyer time at the relevant agencies. If it were free, people could file thousands of slightly different requests for all imaginable variations of their dubious business plan, hoping that something would slip by.

If filing such a request costs money, then maybe the process would be more like applying for a patent. There would be some kind of guarantee about processing time, and some kind of legal promise that the response you received actually offers some level of protection when you do proceed with the thing you applied to do. This is clearly a big deal. There would maybe need to be a new profession of counterfactual judges who decide on the legality of things that haven’t happened.

How much should such a process cost? Seems like $10k would only get you started. Who decides the fee structure? What if the case is very complicated and involves many different aspects of law?

Overall, seems like a massive change from how legal systems work today.

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

#214

Post by mattdesl »

pavlov wrote: post #193
arctek wrote: post #178

Earlier quoted context omitted.

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 the…

There are at least hundreds of thousands (probably millions) of securities that have been properly registered in the USA: stocks, corporate bonds, private offerings, and many other kinds of financing structures. It’s not that hard since obviously all kinds of issuers can figure it out. The crypto people want to pretend their tokens are something completely different, so they’re not willing to use the existing process…

How do you propose Bitcoin, or Ethereum, or any other decentralized & peer-to-peer asset be registered as a security? Coinbase and Kraken argue that there is no clear path toward registering these assets within the current framework.

For an example, some of the stringent per-transaction KYC/AML reporting requirements in traditional financial systems are often incompatible with today’s mechanisms of distributed ledgers.

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

#215

Post by palmfacehn »

RandomLensman wrote: post #211
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,…

There are no free markets in human societies. You can pick your trade-offs, that's it. Privatly regulated markets can fail, goverment regulated markets can fail.

Privately managed, voluntary regulation isn't free-market?

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

#216

Post by pavlov »

mattdesl wrote: post #214
pavlov wrote: post #193

Earlier quoted context omitted.

There are at least hundreds of thousands (probably millions) of securities that have been properly registered in the USA: stocks, corporate bonds, private offerings, and many other kinds of financing structures. It’s not that hard since obviously all kinds of issuers can figure it out. The crypto people want to pretend their tokens are something completely different, so they’re not willing to use the existing process…

How do you propose Bitcoin, or Ethereum, or any other decentralized & peer-to-peer asset be registered as a security? Coinbase and Kraken argue that there is no clear path toward registering these assets within the current framework. For an example, some of the stringent per-transaction KYC/AML reporting requirements in traditional financial systems are often incompatible with today’s mechanisms of distributed ledger…

These cases aren’t about Bitcoin and Ethereum but the dozens of other coins that these exchanges have listed.

Coinbase actively cooperated with token founders and venture capitalists like A16Z to list various newly issued tokens so that the creators and VCs could sell them to retail investors. This arrangement sure makes them look like securities.

Personally I’m fine if Coinbase and Kraken trade Bitcoin and Ethereum. Being restricted to those would be devastating for their profits though.

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

#217

Post by WinstonSmith84 »

b112 wrote: post #171
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…

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 s…

Yes, banks typically do not have sufficient funds to cover all customer's savings, and when customers realize their bank played with their money but lost, they freak out and do a so called "bank run". At least banks are regulated, so that's fine, right.

For those who have a short memory, a bank run last occurred earlier this year with the Silicon Valley Bank... https://www.investopedia.com/svb-financial-group-shares-crat...

By the way, if you put your cash money in a bank, your money is insured up to 250,000USD in the US and up to 100,000EUR in the EU. Anything above is your own risk. But it's perfectly fine because at least, it's regulated.

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

#218

Post by nvy »

throwawaymaths wrote: post #197
nvy wrote: post #105

Earlier quoted context omitted.

Regulators keep big fish from engaging in predatory behavior. Is the SEC flawed? Absolutely. But the SEC makes markets more free, not less.

Does it? Suppose you'd like to keep the fruits of your hard earned labor on an asset that isn't subjected to inflation at the hands of a capricious or warmongering country. And you'd rather not speculate on greedy capitalists. The SEC is effectively limiting your freedom to do so (whether or not that's a good personal choice)

In our society the concept of a "Free Market" is not one where participants are free to do entirely as they please without consequence. The use of the word Free in "Free Market" implies a freedom from restricted competition which definitionally requires a regulatory body to maintain a somewhat level playing field.

Again, in order to ensure this healthy competition in markets, regulation is required. This is why we attempt to inhibit monopolists, and why antitrust laws in general exist. Absolute freedom in the personal sense is expressly not a goal of modern free market economics.

You are free, subject to taxation of course, to hang onto your "hard earned labor" on your shitcoins but Kraken is not free to operate as a securities exchange unless it complies with the regulations in place so as to ensure an orderly and healthy market.

DeFi people are constantly finding out[0] why some centralization and oversight is a good idea.

[0] https://www.youtube.com/shorts/WntjAM2wqF8

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

#219

Post by westurner »

discodave wrote: post #173
westurner wrote: post #108

Earlier quoted context omitted.

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.

Whether USD deposits have FDIC protection (250K (x2 *) or the balance of the account, whichever is lower; since the Great Recession [1] (before that it was 100K per account))

[1] https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corp...

In 1999, GLBA [2] changed the 1933 Glass-Steagall rule [3] that had prevented banks from investing Savings deposits in order to ensure that they would have enough to prevent another run. (As depicted in "It's a Wonderful Life" (1946); Clarence the angel or Mr. Potter's Potterville)

I'm not sure that it's anywhere explicitly stated that the banks' socialist FDIC corporation justified allowing investing of savings deposits. They created a large shared prepaid credit line for themselves in order to operate safely.

Banks invest in non-securities; without any agreement for future performance.

Banks invest in treasuries, which are tokenizable non-security deposits.

(Some time later, the dotcom boom busted and the US went to war/oil/defense instead of clean energy (like the solar panels that were on the roof until 1980 (due to the oil crisis CPI hostage situation, when it became necessary to defensively meddle in the ME with blowback left for Obama to handle, and not pay for)))

[2] https://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bl...

[3] https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legisla...

https://help.coinbase.com/en/coinbase/other-topics/other/cli... :

> How is client cash stored at Coinbase? The vast majority of Coinbase client cash is stored in FDIC-insured bank accounts and U.S. government money market funds to keep it safe and liquid. Like all assets on Coinbase, we hold client cash 1:1 and your assets are your assets.

https://support.kraken.com/hc/en-us/articles/360001372126-Ar... :

> Are balances stored on Kraken insured? Cryptocurrency exchanges do not qualify for deposit insurance programs because exchanges are not savings institutions. Exchanges are not even meant to be cryptocurrency wallets.

https://www.investopedia.com/kraken-vs-coinbase-5120700 says that Kraken ended staking services in the US in February 2023.

There is yet no FDIC protection for any stablecoin, and yet no CBDC (just FedNow), but US banks are specifically allowed to provide crypto custody services.

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

#220

Post by RandomLensman »

palmfacehn wrote: post #215
RandomLensman wrote: post #211

Earlier quoted context omitted.

There are no free markets in human societies. You can pick your trade-offs, that's it. Privatly regulated markets can fail, goverment regulated markets can fail.

Privately managed, voluntary regulation isn't free-market?

No, because this is always (ultimately) by consent of the societies it is happening in and within those power structures. It always sits on top of a lot of stuff, never in a vacuum.
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