Crypto exchange Kraken will cease staking services as part of the deal with the SEC, according to a press release from the US regulator. This development caused a price increase for various altcoins. Here are the details…
SEC puts Kraken in focus
The US Securities and Exchange Commission (SEC) accused Kraken of failing to register its cryptocurrency staking service as a security offering. The organizer said that Kraken has been offering its staking service to the public since 2019. Users were able to deposit crypto assets with the program, and Kraken advertised rewards of up to 21 percent for those participating in the offer. The SEC claimed that participants lost control of their assets when using Kraken’s staking service and were taking risks with “little protection.”
He also complained that Kraken sets user rewards separately from the staking mechanism of the underlying Blockchains and, as a result, does not adequately explain to users how it determines the rewards. Kraken has now agreed to settle these costs with the SEC, stopping its staking service offering and paying $30 million in various fines and penalties. Kraken has also agreed to enter a final decision pending court approval that will permanently prohibit or restrict it from offering securities through staking services in the future. The company will not be required to accept or deny the SEC’s claims as part of the settlement.
Kraken is ending its staking service
Kraken has confirmed that it will end its staking service for users in the US and automatically repurchase these assets. He said that he will continue to offer staking to users outside the US and the service will continue uninterrupted. The news came shortly after reports that Kraken did not comply with a call from the IRS asking for information about customer identities and transactions. The United States filed a petition to enforce this subpoena on February 3. This action continues from efforts to serve a subpoena stretching back to 2021 and appears to have nothing to do with the SEC’s actions today. As we also reported on Cryptokoin.com, Coinbase CEO Brian Armstrong said he has heard rumors that his company is planning to impose a ban on the SEC’s individual staking services.
These altcoins have made a splash
Management tokens of the largest liquid staking protocols rose on news that US-based crypto exchange Kraken reached an agreement with the US Securities and Exchange Commission (SEC) to end its crypto staking service on Thursday. According to the data, the LDO governance token of Lido Finance, the largest liquid staking protocol with approximately $8.4 billion staked Ethereum (ETH) on the platform, increased by 10.4 percent. Rival Rocket Pool’s RPL increased 7.3 percent. Smaller liquid staking platform tokens like Persistence’s pSTAKE and StaFi’s FIS gained 6.7 percent and 11.4 percent, respectively. At the time of writing these coins are experiencing a slight pullback
Staking is the consensus mechanism for validating transactions for PoS Blockchains, including Ethereum, which offers investors a way to earn returns on their crypto asset holdings. However, the SEC has expressed concerns that staking services are equivalent to unregistered securities under current regulations. The deal between Kraken and the SEC could be a boon for decentralized competitors to take market share from centralized service providers. According to data from Dune Analytics, staking on centralized exchanges accounts for around 28 percent of all ETH staked.
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