CFTC Commissioner Caroline Pham Criticizes Her Own Agency After Accusing KuCoin of “Aggressive” Enforcement Actions
Last updated:
March 29, 2024, 4:34 p.m. EDT
| 2 minutes reading time
CFTC Commissioner Caroline D. Pham issued a statement Friday apparently criticizing her own agency for its recent “aggressive enforcement action” following the agency’s KuCoin charges, saying it “could violate the SEC’s authority.” “.
While Pham praised the independent government agency’s ”vigilance” in “protecting” US markets through the KuCoin charges, she expressed concern that the move could overstep the CFTC’s role in crypto regulation.
CFTC Commissioner Criticizes Agency’s KuCoin Charges
“The CFTC’s actions could violate the SEC’s authority and undermine decades of robust investor protection laws by confusing a financial instrument with a financial activity, shaking the foundations of securities markets,” said Pham in the statement. “Owning stocks is not the same as trading derivatives.”
The CFTC filed charges against cryptocurrency exchange KuCoin on Tuesday, alleging that the digital asset company engaged in a variety of illegal activities, including over-the-counter trading with commodity futures, offering unregistered leveraged or margined transactions and improper solicitation of orders.
Equally important, the federal agency alleges that the crypto exchange failed to adequately implement know-your-customer (KYC) procedures, calling it a “sham package” that “did not prevent U.S. customers from trading commodity interests and derivatives.” to trade on the platform”.
The battle between the CFTC and the SEC continues
The CFTC and the US Securities and Exchange Commission (SEC) have long been at loggerheads over who should lead the country’s regulatory approach to the cryptocurrency sector.
The CFTC typically regulates commodities, while the SEC traditionally controls securities.
In a similar but separate criminal case, the Department of Justice (DOJ) on Tuesday brought a series of its own charges against KuCoin, including “violating the Bank Secrecy Act” and “operating an unlicensed money transfer business.”
Meanwhile, KuCoin CEO Johnny Lyu dismissed the allegations in a statement sent to X, claiming they are standard practice in the digital asset industry.
The challenge we face is not unique to KuCoin, but represents typical growth and regulatory issues faced by emerging industries. There are often regulatory gaps in the early stages of development, but as the industry matures we move towards and implement compliance and standardization.
— Johnny_KuCoin (@lyu_johnny) March 27, 2024
While the SEC has approved Bitcoin for spot ETF trading, recent reports suggest that the federal agency wants to classify Ethereum as a security, boosting hopes detracts from a spot ETH ETF.
In contrast, Bitcoin and Ethereum are classified as commodities in the CFTC’s enforcement action.
Dispute among crypto regulators?
Meanwhile, SEC Chairman Gary Gensler has long been under scrutiny for his heavy-handed approach to regulation through enforcement, failing to provide a clear regulatory framework for the digital asset industry.
The SEC is notorious for cracking down on alleged violations of crypto-related securities laws and instigating litigation with major players in the digital asset industry, including Binance, Coinbase, and Ripple Labs.
The CFTC commissioner’s statement of disagreement may reveal a deeper frustration among federal agency employees in the difficult task of regulating the crypto sector.
