Kraken Shuts Down Crypto Staking Service And Pays SEC $30M Settlement• February 12, 2023 11:05 am • Comments
Kraken has been forced to end its crypto staking-as-a-service platform as a result of being targeted by the SEC where the agency accused the company of offering unregistered securities.
This is part of a recent trend from the SEC where it has been targeting all crypto staking services which will likely impact the industry growth as a whole.
The exchange now has to pay $30 million as part of this settlement to the SEC and must immediately unstake all assets that are backed by US clients.
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This is once again another example where the SEC is regulating the industry through litigation instead of providing clear guidelines which will impact investor confidence.
The recent move is also quite surprising given the fact that Kraken has been offering this service since 2019 so the SEC taking action now is actually quite late.
Oh man, all I had to do was fill out a form on a website and tell people that staking rewards come from staking? Wish I'd seen this video before paying a $30m fine and agreeing to permanently shut down the service in the US. How dumb do I look. Gosh. ⛽️💡https://t.co/UPdQdnI6xN
— Jesse Powell (@jespow) February 10, 2023
Payward Ventures, Inc. and Payward Trading Ltd., the registered companies that make up Kraken, will end staking services and programs, the SEC said. The programs offered the general public access to staking services since at least 2019.
“The complaint alleges that Kraken touts that its staking investment program offers an easy-to-use platform and benefits that derive from Kraken’s efforts on behalf of investors, including Kraken’s strategies to obtain regular investment returns and payouts,” the SEC release said.
In a blog post, Kraken said it would automatically unstake any assets staked by U.S. clients except for staked ether, which won’t be unstaked until after the Ethereum Network’s Shanghai upgrade takes effect. U.S. clients will also be unable to stake new assets (including ether). Non-U.S. clients are unaffected.
Despite this recent lawsuit from the SEC, Kraken stay remains one of the most popular crypto exchanges in the world with impressive trading volume.
With this loss of additional revenue from its staking platform, the company will certainly start to feel the same pressure that many other exchanges have felt during the bear market.
The staking platform had offered around 20% yield for its staking service which is quite high and even outpaces inflation by a large margin.
With that being said, investors are encouraged to do their own research on whether or not these staking services are truly sustainable as they do come with risk.
However, the SEC coming in and making that decision for investors may not be in the best interest for everyone as it eliminates a lot of financial assets that people can have access to.
Today @SECGov charged Kraken for the unregistered offer & sale of securities thru its staking-as-a-service program.
Whether it’s through staking-as-a-service, lending, or other means, crypto intermediaries must provide the proper disclosures & safeguards required by our laws.
— Gary Gensler (@GaryGensler) February 9, 2023
Staking is the process by which proof-of-stake blockchain networks like Ethereum maintain their security. The network’s decentralized validators post crypto as a form of collateral to attest they’ll stay honest. In return for processing transactions, they get rewarded with more tokens.
Many crypto stakers loan their tokens to service providers who run the nodes, and share in the returns.
Coinbase (COIN) also offers staking for its customers, as do an array of decentralized protocols including Lido.
“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,” said SEC Chair Gary Gensler.
“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.”
Coinbase CEO says SEC plans to ban #crypto staking in the USA for retail.
SEC also charged Kraken for running staking as a service as being a security.
Pretty soon only Blackrock will be allowed to stake.
— Lark Davis (@TheCryptoLark) February 9, 2023
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