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Crypto exchange Kraken will discontinue its staking services for U.S. residents as part of a settlement with the SEC, according to a press release from the regulator on Feb. 9.
The U.S. Securities and Exchange Commission charged Kraken with failing to register its cryptocurrency staking service as a security offering.
According to the regulator, Kraken's staking service has been available to the general public since 2019. Users were able to deposit their crypto assets with the program, and the announced kraken rewards as high as 21% for those who participated in the offer.
The sec claimed that the participants lose control of their property and take risks "with very little protection" while using the Kraken staking service. He also complained that kraken determines user rewards independently of the underlying blockchain staking mechanism - and accordingly, does not provide the user with sufficient disclosure of how the rewards are determined.
Kraken has now agreed to settle these charges with the second by terminating the offer of its staking service and paying $30 million in fines and miscellaneous penalties. Kraken has also accepted the entry of a final judgment which, pending the court's approval, will require or definitively limit the provision of securities by way of staking services in the future. The company will not have to admit or disprove the claims of the sec within the framework of the regulation.
Kraken has confirmed that it will end the staking service for users in the U.S. and will automatically unstake those assets. It said that it would continue to provide staking to non-US users and that the service would continue without interruption.
The news comes shortly after the reports that Kraken has breached an IRS subpoena seeking information on the identity of customers and transactions. The U.S. filed a petition to enforce that summons on Feb. 3. That action continues from efforts to serve a summons dating back to 2021 and seems to be unrelated to the SEC’s actions today.
Yesterday, COINBASE CEO Brian Armstrong said that his company had heard rumors that the SEC intends to impose a ban on retail staking services.
Edit: This post has been updated to include details of Kraken's official announcement.
