Kraken Settled SEC Charges by Paying $30 Million
2023.02.10 01:25
Kraken Settled SEC Charges by Paying $30 Million
By Tiffany Smith
Budrigannews.com – The recent accusations leveled against crypto exchange Kraken in relation to its staking-as-a-service program in the United States appear to have shocked members of the crypto community.
The Securities and Exchange Commission of the United States (SEC) announced on February 9 that it had reached a settlement with Kraken regarding allegations that the company “failed to register the offer and sale of their crypto asset staking-as-a-service program,” which the SEC claims is qualified as securities under its jurisdiction.
Staking services for U.S. retail investors will continue to be offered offshore, but Kraken agreed to pay $30 million in fines as part of its settlement with the charges.
The move appears to have enraged investors, politicians, and executives in the industry as well as the crypto community as a whole.
Adam Cochran, a partner in Cinneamhain Ventures and an advocate for Ethereum, criticized SEC chief Gary Gensler, describing him as “an agent of an anti-crypto agenda” rather than a regulator. He also questioned why Sam Bankman-Fried and FTX were not subjected to the same standards:
There is no regulator at Gensler. He is an anti-crypto agent who only wants to use his power as a weapon against those he disagrees with.
The most pressing concern then becomes, “Why didn’t FTX get this treatment?”
Who is paying for him?
The Blockchain Association’s CEO, Kristin Smith, argued in a statement posted on Twitter on February 9 that the current circumstance is a textbook example of why Congress, not the SEC, should collaborate with industry players to forge appropriate legislation:
In response to the settlement that was reached today between Kraken and the SEC, the following statement was made by @KMSmithDC
Tom Emmer, a member of the U.S. Congress who has been critical of Gary Gensler for a long time, reiterated the significance of staking in the crypto ecosystem.
The legislator wrote on Twitter on February 9 that staking services will be crucial to “building the next generation of the internet” and that the “purgatory strategy” will hurt “everyday Americans the most” because they may soon have to get such services offshore.
On the other hand, on February 9, the creator of the Ethereum show Bankless, Ryan Sean Adams, suggested to his 220,800 followers on Twitter that the SEC could have taken other actions rather than charging Kraken out of the blue:
You may have done:
- Required proof-of-reserves;
- Required transparency for stakes;
- Facilitated decentralized stakes
- Instead, we have received yet another hammering from Gary G. Ban. Additionally, we have no faith that decentralized staking will not be your next stop.
You are directing everything offshore.
Since there was “no clear path” to approve crypto staking, other community members questioned how Kraken could have registered with the securities regulator.
Others suggested that it might have an effect on the consensus layer of Ethereum because, as Nansen, an on-chain metrics platform, Kraken is the fourth largest validator on Ethereum.
Nevertheless, not everyone opposed the SEC’s decision. Michael Saylor, a prominent Bitcoin advocate who has long considered Ethereum and other proof-of-stake cryptocurrencies to be securities, concurred with Gensler’s analysis that retail investors “lose control” of their tokens when delegated to external staking service providers:
“Not your keys … ” – @GaryGensler. The @SECGov understands the importance of self-custody
In the meantime, Jake Chervinsky, the Blockchain Association’s attorney and chief policy officer, made the observation that such “settlements are not law” and that Kraken’s decision to settle was most likely an economic decision rather than a legal one:
Settlements are not enforceable. They have come to the conclusion that the economics of settling the dispute are superior to fighting.
Staking-as-a-service is considered a security by the SEC. Neither admitted nor denied, Kraken.
The SEC has not yet provided an answer to this difficult question.
Coinbase CEO Brian Armstrong stated that “regulation by enforcement” would be a “terrible path” for U.S. innovators, as they would be forced to push more of their services offshore. The debate comes as the SEC’s charge toward enforcing action against staking service providers prompted the discussion.
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