Kraken Exchange Agrees to End US Crypto Staking and Pay $30 Million Fine To SEC

The post Kraken Exchange Agrees to End US Crypto Staking and Pay $30 Million Fine To SEC appeared first on Coinpedia Fintech News

The Securities and Exchange Commission (SEC) has announced that cryptocurrency exchange Kraken will pay a $30 million settlement to resolve charges that it offered unregistered securities. The company has agreed to end its staking-as-a-service platform for US customers immediately.

According to the SEC, Kraken’s staking program was marketed as offering an easy-to-use platform and benefits to investors, including regular investment returns and payouts. The regulator has characterized the program as high-risk for investors, as staking-as-a-service providers offer very little protection.

In response to the SEC’s lawsuit, Kraken stated that it will automatically unstake all assets held by US clients, with the exception of staked ether, which will remain staked until after the Ethereum Network’s Shanghai upgrade. US clients will also no longer be able to stake new assets.

The SEC Chair, Gary Gensler, emphasized the importance of proper disclosures and safeguards for crypto intermediaries that offer investment contracts in exchange for tokens. He emphasized that staking-as-a-service providers must register and provide full, fair and truthful disclosure and investor protection.

Other companies, such as Coinbase, also offer staking services. The SEC’s action against Kraken sends a clear message to the marketplace that these types of services must comply with securities laws.

The recent announcement of the SEC fining Kraken for offering unregistered securities does not affect Coinbase’s staking program. According to Paul Grewal, Coinbase’s CLO, staking on Coinbase continues to be available and staked assets continue to earn rewards from the protocol.

Grewal emphasized that the difference between Coinbase’s staking services and Kraken’s is that Coinbase is not considered a security. The rewards earned by Coinbase customers depend on rewards paid by the protocol and commissions, whereas Kraken was essentially offering a yield product. Grewal believes that clear rules that distinguish between the two types of services would provide clarity for consumers, investors, and the industry.

The announcement of Kraken’s settlement comes at a difficult time for the cryptocurrency industry, with recent events such as the collapse of the FTX crypto exchange platform and the shutdown of an argument that NFTs fall under protected speech. The situation shows no sign of improving in the near future.