Kraken shuts down staking service and is fined BRL 160 million by the SEC
CriptoFácil – Scrutiny by the United States Securities and Exchange Commission (SEC) caused cryptocurrency exchange Kraken to end its staking service for US customers. In addition, the digital asset platform will have to pay a fine of US$ 30 million for the irregular offer of the service. That is, around R$ 160 million at the current exchange rate in reais.
As CriptoFácil reported, the US regulator was investigating an alleged sale of unregistered securities by the exchange.
Kraken shuts down staking service in the US
According to an SEC filing published last Thursday (9), Payward Ventures, Inc. and Payward Trading Ltd., the companies that make up Kraken, will end their staking services and programs. In the program, which has existed since 2019, Kraken offered returns of up to 21% per year.
“To settle the SEC’s allegations, the two Kraken entities have agreed to immediately cease offering or selling securities through cryptocurrency staking services or staking programs and pay $30 million in restitution, pre-judgment interest. and civil fines,” the SEC said.
Staking is a service whereby investors “lock” their tokens to secure the network. In return, they receive cryptocurrency rewards. As the SEC noted, “When investors provide tokens to staking-as-a-service providers, they lose control of those tokens and assume the risks associated with those platforms, with very little protection.”
SEC says intent is to protect investors
SEC Chairman Gary Gensler said that crypto intermediaries, when offering investment contracts in exchange for investor tokens, need to provide proper disclosures and safeguards required by US securities laws.
“Today’s action should make clear to the market that staking-as-a-service providers must register and provide full, fair and truthful disclosure and investor protection,” said Gensler.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, said the SEC has taken another step to protect retail investors. He also claimed that Kraken offered investors “outsized returns untethered to any economic realities.” At the same time, the exchange was entitled not to pay any returns, Grewal said.
In addition to terminating US service and the fine, Payward will no longer be able to offer or sell securities via staking.
Kraken staking continues outside the US
Kraken commented on the SEC settlement in a blog post. Per the post, Kraken will continue to offer staking services to non-US customers through a separate subsidiary. US customers will have their assets removed from the program:
“Starting today, Kraken will automatically withdraw all assets from US customers enrolled in the staking program. These assets will no longer earn staking rewards. This applies to all assets except Ether (), which will be withdrawn after the Shanghai update.”