Kraken, a U.S.-based cryptocurrency exchange, has agreed to wind down its cryptocurrency staking program as part of an arrangement with the U.S. Securities and Exchange Commission (SEC) to settle for the unregistered offer of its staking services. The exchange will also pay $30 million in disgorgement, prejudgment interest, and civil penalties, as indicated by the regulator.
Kraken To Pay $30 Million For Not Registering Staking Services
Kraken, one of the largest U.S.-based cryptocurrency exchanges, has agreed to pay $30 million in disgorgement, prejudgment interest, and civil penalties to the U.S. Securities and Exchanges Commission (SEC) as part of a settlement for the unregistered offering of staking services. The settlement, made public on Feb. 9, 2023, also includes the discontinuation of the staking program that Kraken had been offering to its customers since 2019.
Gary Gensler, chair of the SEC, explained that virtual asset service providers need to exercise compliance when offering these investment tools to their customers. Gensler stated:
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.
Furthermore, Gensler declared that the action carried about by the SEC means that every staking as a service provider must now ‘register and provide full, fair, and truthful disclosure and investor protection.’ Gurbir S. Grewal, Director of the SEC’s division of enforcement, also criticized the action of Kraken’s staking program, stating it provided zero insight into the condition of the company to pay the marketed returns.
The decision of this case also implies that all of the staked crypto funds from customers will be automatically unstaked, with the exception of ether, which will have to wait until the Shanghai update. The staking rewards will be awarded on a prorated basis for February 9, as the exchange communicated in a press release.
The Future of Staking
This settlement is made public after Brian Armstrong, CEO of Coinbase, voiced his concerns on Feb. 8 about rumors that indicated the SEC was seeking to ban cryptocurrency staking for retail customers. Armstrong clarified that, for him, staking was not a security, and that this move “would be a terrible path for the U.S. if that were allowed to happen.”
Coinbase, another U.S.-based exchange, also offers cryptocurrency staking options for at least six different cryptocurrency networks, including Algorand, Cosmos, Ethereum, Tezos, Cardano, and Solana.
Kraken also reported that while its staking offer will wind down in the U.S., the company will keep providing staking services to its customers outside of the country through a different subsidiary.
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Source and More information: Kraken Winds Down Staking Program, Pays $30 Million to Settle Unregistered Offering of Staking Services Case With SEC
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