The SEC has fined Kraken, a crypto-currency exchange, $30 million for offering a “unregistered offering” linked to its staking service in the United States. Digital currency advocates are now debating what constitutes a yield product versus an unregistered solution that is not considered a security. Fox News reporter Eleanor Terrett predicts more regulatory crackdowns in the crypto space in the coming weeks, including measures enforcement actions against exchanges and banks.
Observers weigh in on the future of crypto-currency staking after the SEC crackdown.
The recent action by the top U.S. securities regulator against crypto-currency exchange Kraken and its staking service is the subject of much discussion. The day before, Coinbase CEO Brian Armstrong warned that he had heard rumors that the SEC would try to eliminate crypto-currency staking for customers in the United States. The next day, Kraken announced that it was ending staking services for U.S. customers. The SEC, chaired by Gary Gensler, revealed that the regulator has reached a settlement with Kraken on the issue for $30 million in civil penalties and disgorgement.
On Thursday, Gary Gensler stressed that crypto-currency exchanges must comply with regulatory policies when offering investment vehicles to retail customers in the United States. During a interview on the “Squawk Box” on CNBC on Friday, Gensler reiterated that position. “Firms like Kraken can offer investment contracts and investment schemes, but they must provide full, fair and truthful disclosure“, said Gensler. “It protects the investors who are watching your program. That’s the basic law, and they weren&t following it.“
SEC’s Gary Gensler on Kraken staking settlement: Other crypto platforms should take note of this
CryptoElite (@CryptoEliteNews) February 10, 2023
Enforcement actions have sparked discussion about what constitutes a yield product versus a non-conservative alternative that is not considered a security. Economist and trader Alex Krüger weighed in. “A positive narrative effect for later“, said Krüger. tweeted. “Prohibiting US exchanges/custodians from offering staking services will push staking off-chain or overseas, making Ethereum decentralized and out of reach of US regulators. A decentralized Ethereum is a better Ethereum.“
Positive narrative spin for later: banning US exchanges/custodians from offering staking services pushes staking offchain or abroad => ETH is no longer centralized and under the grasp of US regulators.
Decentralized ETH is better ETH.
Alex Krüger (@krugermacro) February 9, 2023
A Fox News reporter claims that impending regulatory enforcement actions against crypto-currency exchanges, banks and token issuers are coming.
SEC Commissioner Hester Peirce expressed concern about the future of the industry and disagreed with the actions. Hester Peirce stated that he was “very concerned” that the “SEC’s solution to a registration violation is to shut down entirely a program that has served the people well“. The Commissioner noted that “a paternalistic and lazy regulator settles on a solution like this regulation: instead of initiating a public process to develop a functional registration process that provides valuable information to investors, it simply shuts it down“.
According to Coinbase’s general counsel, Paul Grewal, Coinbase’s staking service is different,” Coinbase’s staking program is not affected by this news” “What is clear is that Kraken was essentially offering a yield product. Coinbase’s staking services are fundamentally different and are not securities.“In addition to the latest crackdown on staking, rumors are circulating that more enforcement actions are on the horizon.
On Thursday, Fox News reporter Eleanor Terrett reported that more regulatory actions are expected to impact the crypto-currency industry in the coming weeks. Terrett tweeted , “SCOOP: Gary Gensler is embarking on a ‘midnight massacre’ to bring all of crypto under his control. In the coming weeks, the SEC, the New York Department of Financial Services and the Office of the Comptroller of the Currency will initiate enforcement actions against exchanges, banks and entities that mint tokens in an effort to label most of them as securities. I was told that Gensler’s strategy is to take as many enforcement actions as possible while the 118th Congress is still settling in.“
🚨SCOOP: @GaryGensler is embarking on a “midnight massacre” in an attempt to bring all of #crypto under his control. In the coming weeks, the @SECGov, @NYDFS and the @USOCC will be bringing a myriad of enforcement actions against exchanges, banks
Eleanor Terrett (@EleanorTerrett) February 9, 2023