KuCoin Crypto Exchange Closes in New York

In the USA, the crypto exchange KuCoin has had to decide to end its offering in the state of New York. This is part of a deal with the public prosecutor’s office. They had sued KuCoin in March, accusing the crypto exchange of enabling unauthorized trading in securities. The public prosecutor’s office even went so far as to classify Ethereum (ETH) as a security.

For this reason, the KuCoin case was closely observed by the crypto industry beyond New York. With the out-of-court settlement, KuCoin has agreed to pay New York customers USD 16.7 million in compensation and an additional USD 5.3 million in fines to the state. KuCoin is said to have had a good 150,000 customers in New York. Attorney General Leitita Jame celebrated the deal on X, saying: “Shady crypto platforms must play by the rules like everyone else or face consequences.” Crypto regulation in New York is considered particularly strict by US standards.

On the plus side of the deal, observers see the detail that KuCoin does not have to castigate Ethereum as a security. The US Securities and Exchange Commission (SEC) now classifies more than 55 cryptocurrencies as securities, but suffered a defeat in court in the precedent-setting case of Ripple (XRP) in the summer. In addition to Bitcoin (BTC), the SEC has so far also omitted Ethereum from its efforts to strictly regulate cryptocurrencies.

KuCoin’s settlement with the prosecutor’s office does not mention any individual cryptocurrency. Instead, there is general reference to some tokens being considered “securities” or “commodities” under New York law. This means that the deal is unlikely to be used in other proceedings against individual altcoins.

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Conclusion: KuCoin case in New York shows: crypto has a hard time in the US

In New York, it was probably the collapse of the ecosystem around Terra (LUNA) and the algorithmic stablecoin UST in May 2022 that prompted the public prosecutor’s office to take tougher action against the crypto industry. At least $40 billion of (theoretical) capital vanished into thin air within a few days. Since then, the US public has also witnessed the insolvency of the FTX crypto exchange with billions in losses and an SEC that is cracking down on the crypto sector with all its might as a federal authority.

Anyone who takes a permanently optimistic view of Bitcoin and Co. from a European perspective quickly runs the risk of ignoring the considerable risks of regulation and criminal prosecution for the crypto industry in the US. The KuCoin case demonstrates this – and the New York crypto laws also serve as a template for stricter regulations in California, the most populous US state.

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(Featured image by Colton Duke via Unsplash)

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