Poloniex made to pay $10.4 million in fines by SEC
Poloniex, the crypto exchange platform in the US, has agreed to pay $10.4 million to the SEC to settle charges that it was operating an unlicensed crypto exchange for many years.
The exchange was started in 2014 and it was acquired by the crypto payments firm Circle in 2018 and though it continued to operate for a long time, it was only later that the SEC decided to crack its whip on the cryptocurrency sector and charged the exchange for operating without a valid securities exchange license.
“Poloniex chose increased profits over compliance with the federal securities laws by including digital asset securities on its unregistered exchange,” said Kristina Littman, chief of the SEC enforcement division’s cyber unit.
The charges said that the exchange allowed users to buy and sell digital assets including assets that were investment contracts and hence were considered as securities. So, when a platform allowed securities to be exchanged between users, it becomes very important that it gets licensed from the SEC to carry on such activities and get regulated for the same, which the exchange failed to do.
Circle plans to go public over the next few months and as the owner of Poloniex, it wouldn’t want to carry the burden of SEC charges on one of its companies when it goes public. As reported earlier, the company also plans to launch a digital bank and it is reported that it plans to apply for the same shortly. If it does and if the application does get approved, then it could lead to a lot of USDC in circulation. But again, the SEC has been watching the crypto sector like a hawk and Circle would not want to ruffle the feathers of the SEC as it embarks on such major plans.
As Binance has learned it the hard way, it is always better to get along with the regulators and launch innovations in concurrence with them and with their support else the company would risk getting its business shut down at any point of time which is an even bigger risk at a later stage. So, this move to pay off the fines may also have been taken with the future projects in mind, for which strong support from the SEC is required for Circle. Even with all these confidence-building measures, there is still no guarantee that the SEC would be favorable to Circle when the time for approvals comes.