The US-based cryptocurrency exchange Bittrex faces potential enforcement action from the Securities and Exchange Commission (SEC), despite winding down its operations in the country.
The SEC has accused the firm of acting as an exchange, broker-dealer, and clearinghouse without proper registration. This news comes on the heels of Bittrex’s decision to shut down its US operations in March, citing an unfavorable regulatory environment.
Bittrex struggles with regulatory hurdles
According to David Maria, Bittrex’s general counsel, the company explored registering with the SEC in late 2022 but realized it was not a viable option, as they would need to cease all revenue-generating activities to comply.
Maria stressed that the lack of regulatory clarity from the SEC was the main reason behind their inability to comply. Cryptocurrency firms like Bittrex are required to register with the SEC to reduce conflicts of interest and align more closely with traditional stock exchanges.
A significant point of contention is the classification of cryptocurrencies as securities, which brings them under the purview of the SEC. However, the regulatory body does not provide a clear definition for digital assets, instead referring to the Howey test.
Past troubles and potential legal battles
Bittrex has had a tumultuous past, receiving a $53 million fine in 2022 due to “apparent violations” of multiple US sanctions programs.
The exchange reportedly failed to monitor suspicious transactions from individuals located in Cuba, Iran, Sudan, Syria, and the Crimea region of Ukraine, resulting in over $263 million worth of transactions between March 2014 and December 2017.
The SEC also fined Bittrex for an insufficient anti-money laundering program, leading to significant exposure to illicit finance. Although the exchange has begun winding down its US operations, the company remains uncertain whether the SEC will file a lawsuit.
Maria stated that Bittrex would take the matter to court unless the regulators present a reasonable settlement offer. As the regulatory landscape surrounding cryptocurrency becomes increasingly complex, exchanges like Bittrex face mounting challenges.
While the company’s future remains uncertain, its current situation highlights the importance of a clear and consistent regulatory framework for the growing cryptocurrency industry.
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