The Kraken crypto exchange, the world’s largest Bitcoin exchange in euros in terms of volume and liquidity. Has shut down its cryptocurrency staking operations following charges from the SEC.
The US regulatory agency has conducted a closed session, with industry sources reporting an ongoing briefing on the Kraken deal. The news is reported by CoinDesk and also referenced on Watcher.Guru’s official Twitter profile, which reads:
JUST IN: #Crypto exchange Kraken shuts down staking following SEC charges.
— Watcher.Guru (@WatcherGuru) February 9, 2023
Kraken ends crypto staking operations: all the details
With regard to the news, we understand that the SEC will meet to “discuss and vote on the settlement during a closed-door commissioner’s meeting Thursday afternoon,” according to the report. Furthermore, the report states that an official announcement is expected to take place later in the day.
Indeed, there have been rumors of a closed-door meeting conducted by SEC officials to be held today, with many expecting the topic to be cryptocurrency staking.
We now know that the meeting was about the cryptocurrency exchange Kraken and whether it should have to accept to shut down its staking operations as a result of the SEC’s allegations.
At this point, the report notes that neither party commented on the development following Coindesk’s requests.
Subsequently, the news comes a day after Coinbase CEO Brian Armstrong noted that the SEC has put cryptocurrency staking in its crosshairs. Leading many to fear that the procedure could be banned in the United States.
CoinDesk in turn stated that Kraken offers various services, “including a cryptocurrency lending product that offers up to 24% returns.” The report states that each service should also be closed under liquidation conditions.
Kraken offers a number of services under its staking umbrella, including a cryptocurrency lending product that offers up to 24% yield. This is also expected to be closed under the agreement, according to reports. The staking service offered by Kraken offered an APY of 20%, promising to send customers rewards for staking twice a week, as stated on its website.
Gensler on the closure of Kraken’s crypto staking service
As anticipated, the vote comes a day after Coinbase’s CEO tweeted that he had heard rumors that the SEC would prevent retail customers from engaging in staking, the practice of committing crypto tokens to run blockchains such as Ethereum.
However, the SEC declined to comment on Armstrong’s comments Wednesday night. Then again, SEC Chairman Gary Gensler had previously said he believed that staking through entities such as Kraken could meet the requirements of the Howey test.
The latter is a decades-old US Supreme Court case commonly used as a measure of whether something can be defined as a security under US law.
Staking sounds similar to lending, Gensler said at the time. The SEC has already filed and settled charges with lending companies, such as BlockFi, now in bankruptcy. Thus, a Kraken settlement would help Gensler’s mission, giving his agency a big win as it continues its efforts to police the broader crypto ecosystem.
Most people who are betting on Ethereum, for example, are using the services, according to Dune Analytics. At any rate, cryptocurrency markets plummeted after the news broke. Ethereum, a coin secured by a Proof-of-Stake consensus mechanism, fell 4.5% in 30 minutes.
The SEC’s decision annoys the community and beyond: let’s see why
The SEC’s decision regarding Kraken has irked not only the cryptocurrency community, but also investors and politicians. SEC Chairman Gary Gensler is bearing the brunt of the situation.
In a tweet, US Congressman Tom Emmer emphasized the value of staking in the cryptocurrency ecosystem. Staking services would be crucial in “building the next generation of the Internet,” according to the congressman. In fact, the lawmaker accused Gensler’s strategy of hurting “everyday Americans” the most.
Not only that, Bankless TV show creator Ryan Sean Adams also believes the SEC could have taken other measures other than charging on the cryptocurrency exchange. Adams says the SEC could have required Proof of Reserves. In addition, they could have required staking transparency or supported decentralized staking.
Adam Cochran, an Ethereum supporter, criticized Gensler, calling him “an agent of an anti-crypto agenda” and “not a regulator.” In addition, Cochran raised the question of why FTX‘s collapse did not receive the same treatment.
However, not everyone was against Gensler. Bitcoin (BTC) maximalist Michael Saylor, said the SEC understands the importance of self-custody. In addition, Saylor has long argued that Ethereum (ETH) and other PoS (Proof-of-Stake) cryptocurrencies are securities.
Finally, Saylor agrees with Gensler’s conclusion that when tokens are transferred to external staking service providers, individual investors “lose control” over them.