Jacquelyn Melinek11 months
Kraken has settled charges with the U.S. Securities and Exchange Commission (SEC) and is shutting down its on-chain staking program, the government agency shared on Thursday.
The exchange, which was charged under its subsidiaries of Payward Ventures and Payward Trading, will pay $30 million in charges for “disgorgement, prejudgment interest and civil penalties.” In response to the settlement, Kraken has agreed to end its on-chain staking services for U.S. clients, a spokesperson for the exchange told TechCrunch.
As part of the settlement, Kraken has neither admitted nor denied the SEC’s allegations, the spokesperson added.
“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,” SEC Chair Gary Gensler said in the release. “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.”
“Starting today, with the exception of staked ether (ETH), assets enrolled in the on-chain staking program by U.S. clients will automatically be unstaked and will no longer earn staking rewards,” a Kraken spokesperson said. “Further, U.S. clients will not be able to stake additional assets, including ETH.”
Kraken was founded in 2011 and offers over 90 tokens to 190 supported countries, according to its website. This update does not affect non-U.S. clients and staking services will continue uninterrupted in other regions. “These clients will receive staking services from a separate Kraken subsidiary,” the spokesperson said.
Staking is a way to earn rewards for holding a certain token for a certain amount of time. In return for staking, people are paid out yield or additional rewards in exchange for holding their coins to secure the network. Kraken’s staking service offered up to 20% APY, with promises to deliver customers their rewards twice a week, according to the website.
The news comes less than a day after Coinbase CEO Brian Armstrong tweeted that he has heard rumors that the SEC would like to get rid of crypto staking for U.S.-based 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,” Armstrong said in the tweet thread. “Staking is a really important innovation in crypto. It allows users to participate directly in running open crypto networks. Staking brings many positive improvements to the space, including scalability, increased security, and reduced carbon footprints.”
While this settlement inhibits Kraken’s staking operations, it doesn’t fully answer the question of whether the SEC will block all crypto staking going forward. It’s also worth noting that Coinbase also has its own staking services.
The SEC declined to comment when requested by TechCrunch after the time of publication.
This article may be updated to reflect new information.
As an expert in the field of cryptocurrency and blockchain technology, I bring a wealth of knowledge and experience to provide a comprehensive analysis of the recent developments involving Kraken and the U.S. Securities and Exchange Commission (SEC). My expertise is grounded in a deep understanding of the intricate workings of various cryptocurrency platforms, regulatory frameworks, and the evolving landscape of the digital asset industry.
The recent settlement between Kraken and the SEC, as outlined in the provided article, is a significant development that underscores the increasing scrutiny and regulatory oversight within the cryptocurrency space. Let's break down the key concepts mentioned in the article:
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Kraken's Settlement with SEC:
- Kraken, a cryptocurrency exchange founded in 2011, has settled charges with the SEC under its subsidiaries of Payward Ventures and Payward Trading.
- The settlement involves a payment of $30 million in charges for disgorgement, prejudgment interest, and civil penalties.
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Termination of On-Chain Staking Program:
- As part of the settlement, Kraken has agreed to shut down its on-chain staking program for U.S. clients. This decision follows allegations from the SEC related to investment contracts offered through staking services.
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SEC's Allegations and Regulatory Perspective:
- The SEC, through Chair Gary Gensler, emphasizes that crypto intermediaries offering investment contracts, whether through staking or other means, must adhere to securities laws. Proper disclosures and safeguards are required to ensure investor protection.
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Staking-as-a-Service and Investor Protection:
- The SEC's actions signal that staking-as-a-service providers must register and provide comprehensive, fair, and truthful disclosure to investors. This highlights the importance of regulatory compliance in the cryptocurrency space.
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Kraken's Response and Client Impact:
- Kraken, in response to the settlement, has neither admitted nor denied the SEC's allegations.
- The termination of on-chain staking services for U.S. clients means that staked assets will be automatically unstaked, and clients will no longer earn staking rewards.
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Global Impact and Non-U.S. Clients:
- The article specifies that the settlement does not affect non-U.S. clients, and staking services will continue uninterrupted in other regions. Non-U.S. clients will receive staking services from a separate Kraken subsidiary.
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Staking Explained:
- Staking is described as a method to earn rewards for holding a certain token for a specific duration. Users receive yield or additional rewards in exchange for holding their coins to secure the network.
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Coinbase CEO's Remarks:
- The article includes comments from Coinbase CEO Brian Armstrong, expressing concern over potential SEC actions against crypto staking for U.S.-based customers. Armstrong highlights the importance of staking as an innovation in crypto, contributing to scalability, security, and reduced carbon footprints.
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Uncertainty and Future of Crypto Staking:
- The settlement raises questions about whether the SEC will block all crypto staking in the future. The article notes that the SEC declined to comment on this matter.
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Coinbase's Staking Services:
- It's mentioned that Coinbase also has its own staking services, and the article suggests that the SEC's stance on staking may have broader implications for the industry.
In conclusion, the intersection of regulatory actions, cryptocurrency platforms, and evolving industry dynamics underscores the complexities and challenges within the digital asset space. The Kraken-SEC settlement serves as a noteworthy case in the ongoing dialogue between the crypto industry and regulatory authorities, shaping the future of compliance and innovation in the blockchain space.
