(Bloomberg) — Kraken will pay $30 million to settle allegations from the Securities and Exchange Commission that it broke US rules with its cryptoasset staking products and will shut them down in the US as part of a settlement with the regulator.
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The SEC alleged on Thursday that the firm’s staking service was an illegal sale of securities. The agreement with Kraken could have a wider impact on the industry as major crypto exchanges run by Coinbase Global Inc and Binance Holdings Ltd move into products to diversify revenue.
Staking works by allowing users to generate yield in exchange for allowing their tokens to be used to facilitate transactions on the blockchain. In the case of the yields offered by Kraken, they can be as high as 21%, according to the SEC complaint.
A report by Staked and Kraken estimated the global value of staking assets at $42 billion by the end of 2022.
A representative for Kraken said in a statement that the firm would end its services only for US customers. Those customers will be “unstaked,” and customers outside the US will receive staking services from a separate Kraken subsidiary, Robin van Dalen said in the statement. Kraken did not admit or deny the company’s allegations in its settlement.
Over the past year and a half, SEC Chairman Gary Gensler has argued that many cryptocurrencies are really just unregistered securities trading on a blockchain. They say firms must comply with the agency’s tougher trade and investment rules or face consequences. Gensler has repeatedly warned the trading platform that he plans to hold them accountable.
“Today’s action should clarify to the market that Staking must register as a service provider and provide full, fair and truthful disclosure and investor protection,” Gensler said in a statement.
San Francisco-based Kraken is a top cryptocurrency exchange with a daily trading volume of around $650 million worldwide, according to Coinmarketcap. The IRS, which in a separate filing asked a court to compel Kraken to turn over its books and other data, said the exchange had failed to comply with a previous subpoena issued in 2021.
Last August, Coinbase revealed that it was under investigation by the SEC for its staking program. According to tracker Etherscan, the exchange is the second largest depositor of staked ether. DeFi platform Lido Finance is the largest.
Henry Elder, Head of Decentralized Finance at Wave Financial, said that this case was “a great gift for decentralized staking providers like Lido, Rocketpool and StakeWise.” It will be difficult for regulators to control, he said.
(Updated with company comment in fifth paragraph.)
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Source: finance.yahoo.com
