Kraken, a US-based cryptocurrency exchange, has agreed to liquidate its cryptocurrency stake program as part of an agreement with the US Securities and Exchange Commission (SEC) to accept the unregistered offer of its engagement services. The exchange will also pay $30 million in return, pre-judgment interest and civil penalties, as indicated by the regulator.
Kraken will pay $30 million for not registering staking services
Kraken, one of the largest US-based cryptocurrency exchanges, has agreed to pay $30 million in repayment, pre-judgment interest, and civil penalties to the US Securities and Exchange Commission (SEC) as part of an agreement for the unregistered offer of participation services. The agreement, made public on February 9, 2023, also includes the discontinuation of the participation program that Kraken had been offering to its clients since 2019.
Gary Gensler, Chairman of the SEC, explained that virtual asset service providers must exercise compliance when offering these investment tools to their clients. gensler fixed:
Whether through staking as a service, lending, or other means, cryptocurrency brokers, when offering investment contracts in exchange for investor tokens, must provide the proper disclosures and safeguards required by our securities laws.
In addition, Gensler stated that the action taken by the SEC means that each holding as a service provider must now “register and provide full, fair and truthful disclosure and investor protection.” Gurbir S. Grewal, head of the SEC’s enforcement division, also criticized the action of Kraken’s staking program, stating that it failed to provide information about the company’s condition to pay out traded returns.
The decision in this case also means that all staked crypto funds from clients will be automatically withdrawn, with the exception of ether, which will have to wait until the Shanghai update. Participation rewards will be awarded on a prorated basis for February 9, as the exchange release in a press release.
The future of betting
This agreement was made public after Brian Armstrong, CEO of Coinbase, raised concerns on February 8 about rumors that the SEC was seeking to ban cryptocurrency staking for retail clients. Armstrong clarified that, for him, gambling was not a security, and that this move “would be a terrible path for the US if that was allowed to happen.”
Coinbase, another US-based exchange, also offers cryptocurrency staking options for at least six different cryptocurrency networks, including Algorand, Cosmos, Ethereum, Tezos, Cardano, and Solana.
Kraken also reported that while its staking offer will be reduced in the US, the company will continue to provide staking services to its clients outside of the country through a different subsidiary.
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