Kraken Must Immediately Shut Down Staking Service And Pay $30 Million Fine To SEC

Key Points:

• After an investigation, the SEC concluded that the cryptocurrency staking service of the Kraken cryptocurrency exchange violated securities laws.
• Kraken immediately shut down its service and paid the SEC a $30 million fine.
• The crypto exchange said it would automatically cancel staking any assets placed by U.S. customers, except staking Ether.

Following the lawsuit filed on Thursday, Kraken Crypto Exchange will “immediately” terminate the platform’s crypto staking service for U.S. customers and pay $30 million to settle the claims fees charged by the Securities and Exchange Commission (SEC) for which they have offered unregistered securities, according to Coindesk.

The SEC said that Kraken’s holding companies, Payward Ventures, Inc. and Payward Trading Ltd., will terminate the staking program and services. These projects have been offering staking services to the public since at least 2019.

“The complaint alleges that Kraken touts that its staking investment program offers an easy-to-use platform and benefits that derive from Kraken’s efforts on behalf of investors, including Kraken’s strategies to obtain regular investment returns and payouts,”

The SEC release said

As was updated in an earlier Coincu News article on Thursday, the U.S. Securities and Exchange Commission (SEC) is looking into whether crypto exchange Kraken is violating any rules related to the sale of securities. Gensler stated that his main goal in regulating cryptocurrencies throughout 2023 is to make the crypto exchange and lending platforms compliant.

Previously, Kraken CEO Dave Ripley said that in September 2022, there are not any tokens that are securities that we want to list, adding that he does not see a need to register Kraken. as an exchange with the SEC because it is not necessary to offer securities.

Following the sanction decision, Kraken announced in a blog post that it would automatically issue assets other than Ether committed by U.S. customers. The Ether Pledge will be issued after the Shanghai Ethereum network upgrade comes into effect. U.S. customers will not be able to stake new assets (including Ether), but non-US users will not be affected.

In addition, Coinbase, the largest cryptocurrency exchange in the United States, was also affected by the news when it saw its shares drop 14%, the most significant drop since July 2022. Coinbase also offers a staking service for its customers and a variety of decentralized protocols, including Lido.

“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,(…) 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.”

SEC Chair Gary Gensler said.

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