Yesterday reports came out announcing that the number of major centralized exchanges under investigation had grown to three. When looking at how regulators would crack down on crypto and enforce rules and regulations it makes the most sense to go after the companies that are at the top of the food chain and among the best known. This sends a message to the whole industry and allows for good press for the regulators by showing that they are enforcing the law. Centralized exchanges (CEXs) are also structured in a way that they are much easier to investigate as opposed to decentralized exchanges (DEXs).
The newest addition to this list, Kraken, is one that I must admit caught me off-guard since they had previously been fined by the Commodity Futures Trading Commission (CFTC). However, unlike the previous investigation, this new one could be much harder on the company due to the topic that it deals with it which is allowing users in Iran to use its exchange despite the current federal sanctions against the nation. Personal views aside this is now the second major exchange that is facing US government investigations into this issue after Binance.
If this investigation turns into anything like the one that Binance is facing it could turn into a slow-moving black cloud that hangs over Kraken's head for the foreseeable future. It is almost a certainty that at some point one of these companies is going to get caught doing what has been alleged against them and when that happens I cannot imagine the fallout from that. While Binance is enormous and will probably be able to weather a blow if it comes against them I am not sure that the said can be said about Kraken. Unless there is legislation soon that provides what is known as a safe harbor to these companies they are really under a constant threat from regulators. Granting them a safe harbor will allow them to fix issues that have arisen in their operations and to make sure that they are fully compliant with US laws and regulations.
The use of VPNs has definitely impacted the ability of these companies to be able to regulate where customers are accessing these services. While it is easy to come after the companies than people within the US and the government as well use VPNs to protect themselves and their assets. If the government is using VPNs themselves it seems backward to go after a company that is struggling with this very issue and thus the government should address the issues that the company is running into rather than the company itself.
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