Crypto exchange Kraken announced Tuesday that the Central Bank of Ireland had granted its European subsidiary a Virtual Asset Service Provider license.
This development comes as Kraken aims to establish its legal status in various countries, following regulatory scrutiny of its staking service by the U.S. Securities and Exchange Commission (SEC).
The VASP license acknowledges that Kraken has met the requirements set by the Central Bank of Ireland in combating money laundering and terrorist financing, among other measures. It also signifies Kraken's agreement to ongoing supervision by the Irish government.
Compared to other certifications, such as New York's BitLicense for digital assets companies, Kraken's senior managing director for global operations, Curtis Ting, said the VASP license is relatively less stringent.
In an interview with Fortune, Ting praised Ireland's proactive approach to regulating cryptocurrencies, saying, "Ireland and the Irish regulatory authorities understand crypto, and they are proactive in implementing laws that make sense and have sufficient clarity."
This is not Kraken's first regulatory approval in an E.U. member state. The company also holds a digital assets license in Italy.
Mark Jennings, Kraken's Head of European Operations, highlighted the importance of a clear legal and regulatory framework for the mainstream adoption of cryptocurrencies.
"Clear and effective regulation is essential for the mainstream adoption of cryptocurrencies," Jennings said. "As we bring innovative products and services to market, we're committed to continuing to work with European regulators to operate compliantly under sensible, forward-looking crypto asset regulation."
U.S. regulators force crypto companies to shop abroad
Kraken recently settled with the SEC for $30 million over allegations of operating an unregistered staking business. This adds to the growing list of legal actions the U.S. government has taken against crypto companies.
Earlier in January, the SEC launched lawsuits against crypto exchanges Gemini and Genesis for their yield-bearing project, Gemini Earn, and a possible lawsuit against blockchain infrastructure platform Paxos in February. Even Coinbase, a publicly traded exchange known for its transparency, has been targeted by the SEC.
As a result, major crypto firms are increasingly looking to establish operations in more crypto-friendly jurisdictions, such as Paris and Hong Kong, rather than cities in the U.S. According to Ting, this trend of crypto companies moving abroad actually started almost two years ago but has gained more attention recently due to the escalating legal pressure from U.S. regulators.
Industry experts point to the E.U.'s efforts to regulate the crypto industry through legislation, including a crypto bill to be voted on in 2023, as a key reason firms are attracted to Europe as a business base. In contrast, the SEC's approach of regulating through enforcement has been criticized for lacking clarity.
A report from last Friday revealed that Coinbase plans to establish a new trading platform catering to international clients. Although the exact location of the new entity has yet to be decided, the company said that it's encouraged by the positive developments in the U.K. and the E.U.
Coinbase's plans to expand overseas come amid a challenging period in the U.S. Previously, in March, three major banks — two of them important partners of the cryptocurrency industry — failed.
"The flight to places like Europe is based on clarity," Ting said about the growing trend of crypto firms moving out of the U.S. "It's seen as an antithesis to other jurisdictions that have taken a more chaotic approach."