Ali Raza
The US Securities and Exchange Commission (SEC) appears to be cracking down on the cryptocurrency market. After rumors that the SEC was planning to ban crypto staking for retail customers in the US, Kraken has announced it will shut down crypto staking services for US customers as it reached a $30M settlement with the regulator.
Kraken shuts down crypto staking in SEC settlement
On February 9, the CEO of Coinbase, Brian Armstrong, started a rumor about the SEC planning to shut down crypto staking in the US. Armstrong and other members of crypto Twitter called out the SEC for regulating the crypto market through enforcement.
1/ We're hearing rumors that the SEC would like to get rid of crypto staking in the U.S. for retail customers. I hope that's not the case as I believe it would be a terrible path for the U.S. if that was allowed to happen.
— Brian Armstrong (@brian_armstrong) February 8, 2023
However, the criticism is not slowing down the regulatory crackdown in the crypto industry. The SEC started showing interest in regulating crypto staking after suing Genesis and Gemini over their Earn product, which the regulator terms security.
The Kraken cryptocurrency exchange has now announced it will be halting its crypto staking program in the US. The exchange will also pay a $30M settlement to the SEC. This settlement follows previous claims by the SEC that Kraken had failed to register its crypto-staking program.
The regulator noted that Kraken would receive crypto from investors wanting to stake their tokens on the platform to receive returns of up to 21%. Kraken started offering digital asset staking services in 2019, with the agency adding that the exchange promoted this platform as “easy to use.”
According to the SEC, Kraken received over $2.7 billion worth of digital assets from investors participating in the scheme, with the exchange making around 4147 million in revenues since the program was launched.
SEC Chair 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.
Gensler added that the action against Kraken should demonstrate to other companies offering similar services the need to register and have full disclosures and investor protection.
SEC Commissioner rebukes agency over Kraken settlement
It appears that the action taken by the SEC against Kraken has displeased the crypto community and some members of the agency. SEC Commissioner Hester Pierce has publicly criticized the agency over Kraken’s discontinuation of crypto staking services in the US.
Pierce released a statement on February 9 titled “Kraken Down,” saying that the regulatory body was regulating the crypto market through enforcement. He also said that the SEC’s actions were not a fair way of regulating an emerging industry.
My thoughts on today's Kraken settlement: https://t.co/mijt3MNN4U
— Hester Peirce (@HesterPeirce) February 9, 2023
She also said that staking services were not uniform across the industry, and it was not prudent that the SEC imposes one-off enforcement actions. The CEO of Coinbase applauded her remarks.
Pierce added that the commission was “lazy and paternalistic,” adding that the agency needed to develop a public process of creating a workable registration process that would deliver valuable information to the investors.
Paxos being investigated by US regulator
The SEC crackdown against Kraken also comes amid reports that the New York Department of Financial Services was investigating stablecoin issuer Paxos. However, the extent of the investigation remains unclear.
JUST IN: New York Regulator launches investigation into $BUSD & $USDP stablecoin issuer Paxos, CoinDesk reports.
— Watcher.Guru (@WatcherGuru) February 9, 2023
Paxos also hit the headlines amid rumors that the US Office of the Comptroller of the Currency might ask the company to withdraw an application for a full banking charter. Paxos received a provisional bank charter from the OCC in 2021.
Related
- US Crypto Exchange Kraken is Shuttering its Abu Dhabi Office 1 Year After Getting License
- Kraken Crypto Exchange Might Be in Big Trouble for Selling Unregistered Securities if SEC Has Its Way
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This article was written for Business 2 Community by Ali Raza.
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