The US Department of Justice brought charges against the KuCoin crypto exchange, after which more than $500 million was almost immediately withdrawn from the platform. KuCoin executives stand accused of deliberately servicing clients from the United States without licenses and failing to register as a financial service. What awaits the exchange? Is Washington increasingly tightening the screws on the crypto world? And why KuCoin?
The US Department of Justice has accused the crypto exchange of knowingly attracting American customers, but not following anti-money laundering and anti-terrorism financing requirements.
The accusations are serious. If they are proven in court, the managers of the exchange and the company itself will face large fines and, possibly, prison sentences. Washington is clearly stepping up pressure on the crypto industry and demanding strict compliance with laws.
Why KuCoin? Such infringements amid allegations of criminal activity could make KuCoin a prime target for US regulators.
- KuCoin is one of the largest crypto exchanges in the world with over 30 mln users and billions of dollars in daily trading volume. It is one of the top 5 exchanges in terms of spot and derivatives trading. This scope automatically attracts the attention of regulators.
- The filing states that KuCoin deliberately advertised its services to American clients on social networks, positioning itself as an exchange without a mandatory KYC procedure. This could be construed as flagrant disregard for anti-money laundering requirements.
- According to the US Department of Justice, more than $5 bln of funds involving dubious origin from darknet markets, ransomware, fraud, etc. have passed through KuCoin since 2017. Such a huge amount of criminal money could not fail to raise red flags.
- KuCoin failed to register as a financial operator with either FinCEN or the Futures Trading Commission, although it was required to do so.
Unless the charges stick and a fine is actually meted out, it’s too soon to talk about an imminent collapse. Much will depend on the outcome of the trial and regulatory measures. That said, a blow to one of the largest exchanges would undoubtedly spell trouble for the entire industry. An arduous trial lies ahead with potential fines and restrictions for KuCoin. Therefore, the crypto industry will have to continue to adapt to increasingly stringent regulatory oversight.