KuCoin, a major player in the digital asset world, has wrapped up a legal tussle with New York state authorities, agreeing to a hefty $22 million settlement.
KuCoin New York Lawsuit and Settlement
In the KuCoin New York case, the digital asset exchange faced a lawsuit from New York Attorney General Letitia James. KuCoin was accused of operating a digital asset trading platform without proper registration as a broker-dealer in commodities and securities. This meant New York residents could trade digital assets on their platform without the necessary regulatory clearance.
The platform previously boasted a privacy-centric approach, allowing users to transact without KYC or AML obligations, solely utilizing digital assets for transactions, sidestepping compliance with banking partners’ regulations.
To put an end to this legal battle, KuCoin, which sees more than $1 billion in daily trading volume and welcomes more than 2 million visitors each week, has agreed to pay $22 million, including $5.3 million in direct penalties to New York and $16.7 million in digital asset reimbursements to nearly 178,000 affected investors. Alongside this financial settlement, KuCoin has pledged to completely cease its operations in the state.
Implications of the Settlement
This settlement signifies a firm stance taken by U.S. regulators against digital-asset entities flouting regulations. Attorney General James, who filed the lawsuit against KuCoin based in Seychelles, emphasized that digital-asset firms need to adhere to the same rules as traditional financial institutions. KuCoin’s exit from New York reflects the growing crackdown on fraud, money laundering, and investor protection issues within the digital-asset space.
Related reading: Regulatory “Siege” Underway For U.S. Exchanges — Warns Ex-SEC Official
New York State Attorney General Letitia James said:
“Crypto companies should understand that they must play by the same rules as other financial institutions,”
Ethereum Labelled as Security
Interestingly, the lawsuit against KuCoin brought attention to Ethereum, classifying it as a security. This marked a significant moment in regulatory actions, challenging the prevailing notion of Ethereum’s classification within the digital-asset landscape.
Related reading: Bitcoin Is The Only Winner In SEC Clash
The press release regarding the lawsuit mentions:
“This action is one of the first times a regulator is claiming in court that ETH, one of the largest cryptocurrencies available, is a security. The petition argues that ETH, just like LUNA and UST, is a speculative asset that relies on the efforts of third-party developers.”
Broader Regulatory Landscape
KuCoin’s settlement is just one episode in a series of legal battles between U.S. regulators and digital-asset entities. From lawsuits against prominent figures like Binance’s founder Changpeng Zhao and FTX founder Sam Bankman-Fried, to ongoing cases involving Gemini and Genesis, authorities are aiming to curb unregulated activities and enforce compliance within the industry.
In October, New York State also sued digital asset firms Genesis Global ,and In June, the office resolved a case with CoinEx, a Hong Kong digital-asset exchange, through a $1.8 million settlement due to its illegal operations without state registration.
The Grim Regulatory Landscape in the U.S.
While KuCoin’s case reaches a resolution, the regulatory scrutiny surrounding digital asset companies shows no signs of abating. New York’s Attorney General office remains engaged in multiple cases against other similar entities. This highlights the persistent efforts to forcing exchanges into compliance and shaping the industry operations in the U.S.
KuCoin’s $22 million settlement and subsequent exit from New York serve as a strong reminder that compliance with regulatory standards seems to be non-negotiable in the rapidly evolving landscape of digital assets. As the industry navigates these legal challenges, the focus remains on establishing a framework that ensures both operator accountability and user protection.
