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On Thursday, Kraken agreed to shut down its cryptocurrency staking services in the US and pay a $30 million fine to settle charges against it by the U.S. Securities and Exchange Commission (SEC).
According to a dry ad, by offering a crypto staking program as a service, the crypto exchange would have offered non-registered securities products, thus violating securities regulations.
Thursday's decision was received with mixed reactions, with most crypto members being shaken by the growing dry encroachment into the area. In a move of surprise, hester peirce, a civil servant commissioner, was one of the first people to react to the repression.
By way of a declaration, She opposed Kraken's decision, noting that a "paternalistic and lazy regulator arises over a solution such as that of this regulation." she said, it would have been more prudent for the sec to initiate a public process to develop a workable registration process that provides valuable information to investors on crypto staking instead of just shutting it down.
Brian Armstrong, co-base CEO, also reacted, noting they will continue to fight for economic freedom and protect their clients from the excesses of the government. Earlier on Wednesday, Brian wrote that they were “hearing rumours that the SEC would like to get rid of crypto staking in the U.S. for retail customers”, warning that it would be a terrible path for the U.S.
Weighing in on the matter, Republican congressman Tom Emmer lambasted the SEC for supposedly trying to stifle innovation and using all available means to keep crypto out of the mainstream financial systems.
In the meantime, as the crypto staking debate rages, Gary Gensler defended Sec's actions against Kraken promising to break the whip on more players. In an interview with cnbc on Friday, the second president said that Kraken's misfortunes were the result of her inability to disclose essential information to the investor public.
In Gensler’s words:
“Kraken was asking the American public for their coins and saying that ill give you a return of 4% to 21% and the problem was they were not disclosing to the investing public the risks they were entering into…We've had a fundamental business in the U.S. since the 1930s-you can take any risk you want. Companies like Kraken can offer investment contracts and investment schemes but they have to have full fair and truthful disclosure”
Asked how the staking-as-a-service program differs from products such as Coinbase’s yield product, he noted that “it’s not about the labels; it’s about the underlying economics.” From his perspective, every crypto company based in the United States has had to comply with securities regulations as long as they took tokens from the public and put them into the platforms they control.
"Well, there's a crypto saying, "Not your keys, not your coins"...so they should take note of that and try to comply, make appropriate disclosures and entries, etc." He added.
