The U.S. regulator SEC (Securities and Exchange Commission) is going on a crusade against crypto staking services, with the first victim being the crypto exchange Kraken, which will have to shut down its crypto staking service in the United States.
It should be noted that the closure of Kraken’s crypto staking service only affects the company’s American customers, not France or other foreign countries where Kraken offers its services, the company confirmed.
On its website and on Twitter, the SEC and its chairman, Gary Gensler, say they acted for the “protection of retail investors by shutting down this unregistered crypto staking program.”
The SEC blames Kraken for not registering its crypto staking service with regulators, a service that was therefore illegal in its eyes and must be shut down.
The Securities and Exchange Commission today charged Payward Ventures, Inc. and Payward Trading Ltd. both commonly known as Kraken, with failing to register the offer and sale of their crypto asset staking program as a service, whereby investors transfer crypto assets to Kraken for staking in exchange for advertised annual returns of up to 21%.
To settle the SEC’s lawsuit, both Kraken entities have agreed to immediately cease offering or selling securities through crypto asset staking services or staking programs and to pay $30 million in restitution, prejudgment interest and civil penalties,” the SEC’s statement read.
SEC Chairman Gary Gensler said:
Whether through staking as a service, lending, or other means, crypto intermediaries, when offering investment contracts in exchange for investor tokens, must provide the appropriate disclosures and safeguards required by our securities laws.
Kraken’s CEO, protect the crypto industry
Kraken will distribute final rewards on a pro-rata basis through February 9. These awards will not be put into play. Kraken will instead pay out the rewards in their unstaked form. All staked ETH will become unstaked after the Shanghai upgrade and will continue to earn rewards until then.
However, there is no change in the payment structure until the Shanghai upgrade, when the ETH will no longer be staked. Staking services for non-U.S. customers will continue without interruption.
Non-U.S. customers can continue to stage and withdraw assets, as well as automatically earn and wager rewards, as usual.
I sincerely hope that someone will prove, in court, that there is a legal and user-friendly version of custodial staking that can be offered to U.S. consumers. It will be a brutal, time-consuming and expensive fight and a massive distraction, but the industry and the United States will be extremely grateful.
Kraken’s CEO calling on the U.S. Congress to act to protect the crypto industry from the harmful crackdown by U.S. regulators, who are often overwhelmed by aspects of blockchain and crypto technology that they don’t always understand very well.