Kraken is shutting down its U.S. cryptocurrency staking service and will pay $30 million in penalties as part of a settlement with the Securities and Exchange Commission (SEC). The regulator accused the company of selling unregistered securities through its staking program.
Kraken comes under fire from the Securities and Exchange Commission
Iconic cryptocurrency exchange Kraken, which has been charged by the SEC under the guise of its affiliates Payward Ventures and Payward Trading, will pay a $30 million fine to the Securities and Exchange Commission under “disgorgement, prejudicial interest and civil penalties”.
Consequently, Kraken has agreed to end its cryptocurrency staking services for its US customers. Kraken therefore immediately withdrew from the market all the assets of its American customers engaged in its staking program.
In a press release, the SEC gives more context to this surprising decision:
“The Securities and Exchange Commission has accused […] Kraken for not registering the offering and selling of their crypto-asset staking program as a service. […] The Complaint alleges that Kraken touts that its staking investment program offers an easy-to-use platform and benefits that flow from Kraken’s efforts on behalf of investors, including Kraken’s strategies for achieving investment returns and regular payments. »
This measure applies to all cryptocurrencies linked to the Kraken staking service, with the exception of ETH. Indeed, it is not yet possible to withdraw the ETH engaged in staking, nor for the associated rewards. This will only be possible after the Shanghai and Capella updates of the Ethereum blockchain, which should take place next March.
That non-American customers be reassured, Kraken clarifies that it will continue to offer staking services outside the United States through a separate subsidiary.
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The Beginning of the End for US Staking?
This transaction is the SEC’s first crackdown on stakinga product highly appreciated by investors and commonly offered by centralized and decentralized platforms.
In a post on Twitter, SEC Chairman Gary Gensler explains that most staking service providers do not provide their customers with adequate information, especially about how the company protects staked cryptocurrencies:
“When a company or a platform offers you this type of return, whether it calls its “Lending”, “Earn”, “Rewards”, “APY” or “Staking” services, this approach must be accompanied by the protections provided for by federal securities laws.
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
This sad news for the cryptocurrency ecosystem as a whole comes shortly after Coinbase CEO Brian Armstrong tweeted that the SEC would like to get rid of cryptocurrency staking in the United States. The rumor was quickly confirmed.
Is the SEC seeking to block all cryptocurrency staking services in the United States? It’s a safe bet that this is indeed the case, and that the situation is even worse than we imagine. All eyes are now on other US platforms, including Coinbase, which also offers a staking service to its customers.
👉 To go further: The White House calls for better regulation of cryptocurrencies in 2023
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Sources: Kraken, SEC
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Editor-in-chief of Cryptoast, I discovered Bitcoin and blockchain technology in 2017. Since then, I have been striving to share quality content so that the sector becomes more democratic for everyone.
Clement Wardzala
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