Crypto exchange Kraken announced a settlement with the U.S. Securities and Exchange Commission [SEC] with regard to the former’s on-chain staking program. As a result of this, Kraken has agreed to end its on-chain staking services for U.S. clients.
According to the announcement post, these assets will no longer earn staking rewards. The move will impact all staked assets except for staked ether [ETH], which the trading firm revealed will be unstaked after the Shanghai upgrade.
Any additional assets including ETH. will not be available for staking to U.S. clients.
However, the exchange will continue to provide staking services for non-U.S. clients through a separate Kraken subsidiary. Earning and staking rewards for non-U.S. clients will continue uninterrupted as well.
The development has sent alarm bells ringing in the crypto community, especially for other crypto exchanges such as Coinbase which are too under the SEC radar.
Just recently Coinbase CEO Brian Armstrong expressed concerns over the rumors that SEC banning crypto staking like ETH2.0 to retail users in the U.S.
As reported by TronWeekly, Gary Gensler, the chairman of the SEC previously warned that Ethereum’s upgrade could mean the cryptocurrency could be regulated as a security that sparked a price sell-off then.
Gensler’s comments were made during Ethereum’s Merge upgrade where it officially transitioned to a proof-of-stake system, last year.
This arrangement where Ethereum’s proof-of-stake, allowed holders to lock up their coins to earn a return, is what caught SEC’s attention to regulating Ethereum as a security.
But with the latest turn of events, it seems that the markets regulator has taken an aggressive approach over a key revenue stream for exchanges.
Trouble For US Crypto Firms After Kraken’s $30M Settlement
After numerous high-profile failures that put consumers in court seeking pennies on the dollar—or satoshis on the bitcoin—the SEC has renewed its efforts to crack down on the passive investment offering, giving American crypto businesses more trouble.
As for the latest case, Kraken settled with the agency on 9th Feb., ending its staking program and agreeing to pay $30 million in disgorgement, prejudgment interest, and civil penalties.
In a press release, the SEC chair reiterated the following:
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. 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.