Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.
Kraken comes off as the next high-profile crypto entity that will be placed on the SEC’s crosshairs in recent times.
American digital currency trading platform Kraken is reportedly prepared to enter into a settlement deal with the United States Securities and Exchange Commission (SEC) for offering unregistered Staking-as-a-Service products to US customers. As reported by The Block, a Kraken spokesperson confirmed the plans by the exchange and the firm will neither accept nor deny the regulator’s claims.
According to the terms of the settlement, Kraken will halt the offering of its crypto-staking service to Americans while also paying the sum of $30 million as a fine.
The SEC Chairman Gary Gensler has been a vocal critic of Staking as an investment means as he flagged the lock-up of Ethereum (ETH) at a time during the long transition period from Proof-of-Work (PoW) to Proof-of-Stake (PoS). Gensler believes the lockup of funds by investors for the sake of earning a profit based on the work of others is a validation of the Howey Test for securities.
“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,” said SEC Chair Gary Gensler. “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.”
Kraken comes off as the next high-profile crypto entity that will be placed on the SEC’s crosshairs in recent times. The regulator has been fighting a legal battle with the blockchain payments firm, Ripple Labs Inc for the sale of unregistered XRP coins which it tagged securities.
Ripple has given the SEC a very good fight back and the case is on track to be settled in a few weeks’ time.
Kraken SEC Crackdown: Broad Regulatory Backlash
The SEC fine of Kraken for offering staking services has received a very broad backlash from members of the crypto community. While the major concern is that actions from the SEC will only push innovators and entrepreneurs to other countries to do business, many are also concerned about the lag the US economy will experience in terms of a slowdown in financial innovation.
One of the primary critics of the SEC is its own Commissioner, Hester Peirce, popularly known as Crypto Mom.
“A paternalistic and lazy regulator settles on a solution like the one in this settlement,” she wrote in a published statement noting the regulation by enforcement is neither efficient nor fair. “More transparency around crypto-staking programs like Kraken’s might well be a good thing. However, whether we need a uniform regulatory solution and if that regulatory solution is best provided by a regulator that is hostile to crypto, in the form of an enforcement action, is less clear.”
It remains unclear whether more enforcement actions will also be rolled out against other crypto entities in the United States including Coinbase Global Inc (NASDAQ: COIN).