US SEC Shuts Down Kraken’s Crypto Staking Platform, Slaps $30Million Settlement
The rumors of SEC’s probe into crypto exchange have been finally confirmed in the announcement by the securities regulator on Thursday, February 9.
Yesterday, the SEC accused Kraken for failing to register the offer and conducting the sale of its crypto asset staking-as-a-service program. As a result, the SEC has slapped $30 million in settlement penalties which Kraken has agreed to pay.
Crypto exchange Kraken is one of the centralized exchanges that offered crypto staking facility to it users with annual yields as high as 21 percent. Commenting on the development, SEC chairman Gary Gensler said:
“Whether it’s through staking-as-a-service, lending, or other means, crypto intermediaries, when offering investment contracts in exchange for investors’ tokens, need to provide the proper disclosures and safeguards required by our securities laws. Today’s action should make clear to the marketplace that staking-as-a-service providers must register and provide full, fair, and truthful disclosure and investor protection.”
Soon after the SEC’s announcement, Kraken announced that they would immediately unstake all US clients assets who participated in the on-chain staking program. This applies to all staked assets except for ETH which will be unstated after the Shanghai upgrade ahead in March 2023. Kraken said that it will, however, continue to offer staking services to non-US clients through its other subsidiary.
The recent action by the U.S. SEC is a major escalation that could lead to the complete ban on offering crypto staking facilities to investors. Coinbase CEO Brian Armstrong had already warned of this action a day ago. Armstrong said that ban on crypto staking would be an attack on crypto innovation.
Pro-crypto SEC Commissioner Hester Peirce, also popular as crypto mom, voiced her concerns over SEC’s decision. She called out the SEC for not offering clearing guidance for a very long period of time since staking has been in the crypto space for many years. “Instead of taking the path of thinking through staking programs and issuing guidance, we again chose to speak through an enforcement action, purporting to “make clear to the marketplace that staking-as-a-service providers must register and provide full, fair, and truthful disclosure and investor protection,” she wrote.
She also added that shutting down the entire program is a far-fetched action by the SEC and thus urged for greater regulatory transparency for crypto-staking programs.
In his tweet, the Coinbase CEO wrote: “We will keep fighting for economic freedom (our mission at Coinbase). Some days being the most trusted brand in crypto means protecting our customers from government overreach”.