On Thursday, Kraken agreed to shut down its cryptocurrency staking services in the US and pay a $30 million fine to settle charges against it by the U.S. Securities and Exchange Commission (SEC).
According to an announcement by the SEC, by its offering of a crypto staking-as-a-service program, the crypto exchange was allegedly offering unregistered securities products and thus contravening Securities Regulations.
Thursday’s decision has been received with mixed reactions, with most crypto adherents being rattled by SEC’s increasing encroachment in the sector. In a surprise move, Hester Peirce, a ranking commissioner of the SEC, was one of the first individuals to respond to the crackdown.
In a statement, she dissented from the decision taken against Kraken, noting that a “paternalistic and lazy regulator settles on a solution like the one in this settlement.” According to her, it would have been more prudent for the SEC to initiate a public process to develop a workable registration process that provides valuable information to investors on crypto staking instead of just shutting it down.
Coinbase CEO Brian Armstrong also reacted, noting that they will keep fighting for economic freedom and continue protecting their customers from government overreach. Earlier on Wednesday, Brian wrote that they were “hearing rumours that the SEC would like to get rid of crypto staking in the U.S. for retail customers”, warning that it would be a terrible path for the U.S.
Weighing in on the matter, Republican congressman Tom Emmer lambasted the SEC for supposedly trying to stifle innovation and using all available means to keep crypto out of the mainstream financial systems.
Meanwhile, as the debate on crypto staking rages on, Gary Gensler has defended SEC’s actions against Kraken promising to crack the whip on more players. In a Friday interview with CNBC, the SEC chair clarified that Kraken’s woes came about from its failure to disclose vital information to the investing public.
In Gensler’s words:
“Kraken was asking the American public for their coins and saying that ill give you a return of 4% to 21% and the problem was they were not disclosing to the investing public the risks they were entering into…We have had a basic bargain in the United States since the 1930s -you can take whatever risk you want. Companies like Kraken can offer investment contracts and investment schemes but they have to have full fair and truthful disclosure”
Asked how the staking-as-a-service program differs from products such as Coinbase’s yield product, he noted that “it’s not about the labels; it’s about the underlying economics.” According to him, every US-based crypto firm had to abide by securities regulations as long as they were taking tokens from the public and depositing them in platforms that they control.
“There is a saying in crypto that says “not your keys, not your coins” …so those other platforms should take note of this and seek to come into compliance, do the proper disclosures and registrations and the like.” He added.