Kraken, one of the largest cryptocurrency exchanges, has been accused by the SEC (Securities and Exchange Commissions) of failing to register the offer and sale of its 'staking-as-a-service' programme. As a result, it agreed to immediately cease offering the staking service in the United States and pay $30 million in damages. Additionally, the New York State Department of Finance ordered the company to stop creating new BUSD stablecoins, tokens linked to the largest cryptocurrency exchange Binance.
SEC offensive on cryptocurrency exchange Kraken
For more than a year now, we have seen numerous lawsuits from the US Securities and Exchange Commission regarding cryptocurrency exchanges. Gary Gensler, chairman of the SEC, announced that he believes most cryptocurrency tokens and exchange services meet the legal definitions of the Howey test, which determines whether an investment is considered a security.
The Howey test consists of 4 assumptions to check whether an investment is a security. And therefore requires registration and regulation.
- Is there a cash investment involved?
- Is the investment profit-driven?
- Is the profit dependent on the actions of another person or entity?
- Is the investment not an interest in an ongoing business?
If a transaction meets all four criteria, it is considered a sale of securities and is regulated by the SEC.
Kraken, after being accused by the SEC of failing to register to offer and sell its 'staking-as-a-service' programme (locking cryptocurrencies in an account in exchange for remuneration), has agreed to immediately cease offering the staking service in the US and pay $30 million in damages. It should be noted that only the staking service has been suspended for the time being, not the operation of the exchange itself. If the service is blocked by most exchanges, this could noticeably reduce the number of staked tokens. This could lead to an increase in supply for many such proof-of-stake cryptocurrencies, such as the second largest cryptocurrency ethereum (ETHUSD), among others.
Source: Conotoxia MT5, ETHUSD, Daily
BUSD suspends printing
Binance, the world's largest cryptocurrency exchange, has announced that Paxos Trust Co., the company providing the stablecoin BUSD, has been instructed by the New York State Department of Finance to stop printing the Binance token, which is the third largest stablecoin. BUSD has a market value of $16 billion and serves a function in the Binance ecosystem. As a result, the market value of BUSD would gradually decrease, but Paxos will continue to operate the product and manage withdrawals ensuring that funds are safe and fully covered by reserves in their accounts. Binance Coin (BNBUSD), the token of the Binance exchange, fell by more than 10% last week.
Source: Conotoxia MT5, BNBUSD, Daily
Despite recent increases, no new money flowing into the cryptocurrency market
Stablecoins could be said to represent a quantity of money ready for investment in the cryptocurrency market. Therefore, by looking at their quantity, we could say whether or not there are currently more funds to invest in this market. Their amount has been continuously decreasing since May 2022. Currently, the decrease is 22.6% year-on-year and 1% month-on-month. Therefore, it does not appear that the recent increases could be sustained. And a breakthrough on the price of bitcoin (BTCUSD) to the USD 21,000 level seems to be a matter of time.
Source: https://btctools.io/stats/market-cap
Source: Conotoxia MT5, BTCUSD, Daily
Grzegorz Dróżdż, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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