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    Home»News»Policy & Economy»Kraken Stops Staking Services for U.S Clients
    Policy & Economy

    Kraken Stops Staking Services for U.S Clients

    Anietie DavidBy Anietie DavidFebruary 10, 2023Updated:February 10, 2023No Comments4 Mins Read
    Kraken Stops Staking Services for U.S Clients
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    Cryptocurrency exchange Kraken has reached an agreement with the United States Securities and Exchange Commission to stop offering staking services or programs to U.S. clients.

    In a Feb. 9 announcement, the SEC said it accused Kraken of “failing to register offers and sales of its crypto asset staking-as-a-service program,” which qualifies the commission claims as securities under its jurisdiction. The cryptocurrency company has agreed to suspend operations of its staking program for US clients, paying $30 million in disgorgement, interest in advance and civil penalties.

    “Kraken not only offered investors outsized returns untethered to any economic realities, but also retained the right to pay them no returns at all,” said the SEC’S Division of Enforcement director, Gurbir Grewal. “All the while, it provided them zero insight into, among other things, its financial condition and whether it even had the means of paying the marketed returns in the first place.”

    Two Kraken entities, Payward Ventures Inc and Payward Trading Ltd, agreed to immediately cease offering or selling securities through crypto asset staking services or staking programs and pay $30 million in disgorgement, interest, and penalties.

    — U.S. Securities and Exchange Commission (@SECGov) February 9, 2023

    The SEC’s complaint alleges that Kraken has been offering cryptocurrency staking services to US users since 2019, promoting it as “an easy-to-use platform and the benefits of Kraken’s efforts on behalf of investors.” However, the commission alleged that Kraken users effectively lost control of their tokens by offering them to the staking program, imparting them with additional risk and “very little protection”.

    Kraken said in a Feb. 9 blog post that it would continue to offer staking services to non-US users through a separate subsidiary.

    SEC Commissioner Publicly Rebukes SEC Over Kraken Case

    The Commissioner of the U.S. Securities and Exchange Commission (SEC) Hester Pierce publicly rebuked her own agency for shutting down cryptocurrency exchange Kraken’s US-based cryptocurrency staking program. The commissioner slammed her agency in a statement titled “Kraken Down,” arguing that regulating law enforcement is not an effective or fair way to regulate an emerging industry. She wrote:

    “Today, the SEC shut down Kraken’s staking program and counted it as a win for investors. I disagree and therefore dissent.” 

    Pierce’s testimony also blasted regulators for shutting down programs that serve people well. Telling people through enforcement action what the law is for an emerging industry is not an effective or fair way to regulate, she added. She went on to explain that staking services are not uniform, so one-off enforcement actions and cookie-cutter analysis will not solve the problem.

    Alluding to the regulator’s laziness and paternalism, Peirce suggested that the SEC should initiate a public process to develop a viable registration process that will provide investors with valuable information. Coinbase CEO and co-founder Brian Armstrong echoed Peirce’s comments in a tweet, suggesting that requiring businesses to register its staking services is a “disingenuous offer” as there is no clear path to registration.

    Well said. There was no way to register (a disingenuous offer).

    “Using enforcement actions to tell people what the law is in an emerging industry is not an efficient or fair way of regulating.” https://t.co/6wVZZbQt23

    — Brian Armstrong (@brian_armstrong) February 9, 2023

    The Twitter Community Slams SEC Over Kraken’s Crackdown

    Members of the cryptocurrency community seem outraged by recent allegations against cryptocurrency exchange Kraken over its staking-as-a-service program in the United States. The move appears to have drawn the ire of not only the general crypto community, but also investors, politicians, and industry executives.

    Cinneamhain Ventures partner and Ethereum bull Adam Cochran called out SEC Chairman Gary Gensler, calling him an agent of the anti-crypto agenda rather than a regulator, and questioned why the same standards weren’t applied to Sam Bankman-Fried and FTX.

    2/2

    Gensler is not a regulator. He is an agent of an anti-crypto agenda, who only aims to wield his power as cudgel for those he doesn't agree with.

    So the big question then, is why didn't FTX get this treatment?

    Whose pocket is he in?

    — Adam Cochran (adamscochran.eth) (@adamscochran) February 9, 2023

    Blockchain Association CEO Kristin Smith believes the current situation is a textbook example of why Congress and not the SEC should work with industry players to develop appropriate legislation.

    The following statement is attributed to @KMSmithDC in response to today's settlement between the SEC and Kraken:https://t.co/32KysvKfz0 pic.twitter.com/8vkWZXB6a2

    — Blockchain Association (@BlockchainAssn) February 9, 2023

    US Congressman Tom Emmer, a longtime critic of Gary Gensler, reiterated the importance of staking in the crypto ecosystem. The lawmaker stated that staking services will play a major role in building the next generation of the internet, arguing that the purgatory strategy will do most harm to ordinary Americans, who may soon be forced to fetch such services offshore.

    To be clear, staking enables more people to participate in building the next generation of the internet.@GaryGensler’s regulatory purgatory strategy hurts everyday Americans the most – leaving them in the dust while these opportunities are accessible offshore. https://t.co/8YlSuBVj6L

    — Tom Emmer (@GOPMajorityWhip) February 9, 2023
    Kraken SEC US Lawmakers US Regulators US SEC
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    Anietie David

    Anietie has worked in the blockchain industry for three years, gaining experience in blockchain technology, cryptocurrencies, DeFi, and NFTs. As a seasoned content writer, he is passionate about creating effective content strategies for blockchain brands. In addition to content writing, he also has a strong interest in front-end development. When he's not working, he spends his time reading horror novels or playing CODM.

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