The Seychelles-based cryptocurrency exchange KuCoin came under regulatory scrutiny. In this instance, a New York State Attorney targeted the transaction for unregistered activity.
US officials continue to act against unregistered cryptocurrency exchanges in the country. According to the court complaint, one of the major exchanges, Kucoin, traded and acquired unregistered securities and commodities on behalf of its members.
Moreover, the complaint classified Ethereum as an unregistered security. According to the paper, users may purchase and trade major virtual currencies like ETH, LUNA, TerraUSD (UST), equities, and commodities. The petition noted, “This lawsuit is one of the first instances a regulator has asserted in court that ETH, one of the biggest accessible cryptocurrencies, is a security.”
It is debatable whether the second-largest cryptocurrency should be classified as a security. In addition, the Seychelles-based exchange issued and marketed its KuCoin Earn product, which the lawsuit identifies as security, without being registered as a broker-dealer.
Yet, such measures try to provide crypto exchanges operating in a territory with some confidence. James argued:
“Today’s move is the latest in our attempts to rein in shady cryptocurrency firms and establish order in the sector. All New York residents and businesses are bound to conform to our state’s laws and regulations. Since KuCoin operates in New York without registration, we are taking severe measures to hold them responsible and safeguard investors.”
US authorities have the right to sue cryptocurrency exchanges if they feel a violation of securities laws has occurred. This often happens when unregistered securities and commodities are sold. The same agency recently sued CoinEx for breaking restrictions.
The Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission are the two primary regulating agencies (CFTC). In the United States, they are responsible for trading securities and commodities. Each entity that wants to offer securities or commodities in the United States must register with the appropriate regulatory agency. Also, conform to particular restrictions. The regulatory authorities may take legal action if this requirement is violated.
Depending on the nature of the exchanged assets, crypto exchanges that trade securities or commodities may be subject to various laws and regulations. If a crypto asset is classified as a security, the exchange that trades it must register with the SEC.
The SEC and CFTC have been increasingly active in regulating the cryptocurrency business in recent years. They have issued warnings and pursued legal action against corporations and people who have broken securities laws or participated in the fraud.
Also Read: CFTC Chair Declares Ethereum To Be A Commodity
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