Gary Gensler Urges for “Appropriate Safeguards” as 1.23 Million Ethereum are Staked

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The Ethereum foundation recently stated that the upgrade “is likely to take place in the first half of 2023” in a community update earlier this week, raising the likelihood that it will ship in March. The Ethereum Foundation states that after the Shanghai upgrade, validators will be able to access their staked ETH and unlock their staking incentives.

But now that cryptocurrency exchange Kraken has announced the termination of its staking program, attention is focused on the 1.23 million user-owned ETH holdings that have been staked. As part of a settlement with regulators over accusations that it failed to register the yield-bearing program, Kraken has agreed to halt providing cryptocurrency “staking” services to US users and pay $30 million.

The Securities and Exchange Commission said in a statement on Thursday that this indicated the big cryptocurrency exchange had not put the appropriate safeguards in place for those investors while allowing them to stake their cryptocurrency.

“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.

The SEC’s action was its first significant crackdown on staking, and as a result, the cryptocurrency sector objected and expressed concerns about potential future enforcement.

The crypto community has been debating about the impact of the Shanghai upgrade on the price of Ethereum. 14.31% of all ETH tokens in circulation, according to Staking Rewards, are staked. Since the withdrawals are permitted, the price of ETH may suffer if holders decide to liquidate their staked holdings.

DeFi educator Korpi recently said that, “I’m ultra(sound) bullish ETH over the long term. Nevertheless, it’s hard to ignore the headwinds from withdrawals. A mere expectation of a dump may lead to a dump. But if the market is still bullish, it may be easily absorbed by the new buyers.”