Kraken Settles With US SEC And Discontinues Staking Service: What Does It Mean for Crypto Investors?

B. Ali
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Cryptocurrency exchange Kraken has announced the end of its crypto staking services as part of an agreement with the SEC. The announcement follows Coinbase’s Brian Armstrong’s confirmation of reports that the SEC was targeting crypto-staking service providers.

Hester Pierce, a commissioner of the Securities and Exchange Commission (SEC), has openly criticized her organization for ending Kraken’s crypto staking program in the US.

Also, Armstrong said earlier this week that he had heard rumors that the SEC wanted to stop retail customers in the United States from staking crypto. He claimed this would be a wrong move for the country since it would further push crypto firms worldwide.

Kraken Becomes Victim of SEC

The Kraken cryptocurrency exchange has chosen to discontinue its crypto staking services, becoming the latest victim of the SEC’s tough cryptocurrency regulations. According to a source in the industry, the exchange purportedly reached a secret agreement on Thursday to discontinue providing those services in the United States.

According to a report by Bloomberg on Wednesday, the exchange had been on the SEC’s radar and was close to settling. The official announcement has not yet been released but is anticipated to do so at roughly 4 PM ET (21:00 UTC). The exchange has been providing staking services with a 20% APY and a promise to pay investors every two weeks.

Coinbase Stock Fell More than 14%.

Coinbase shares fell more than 14% on Thursday as CEO Brian Armstrong expressed worry about allegations that the Securities and Exchange Commission was planning more enforcement action against crypto staking.

As in result, the cryptocurrency market has recently seen a lot of volatility, including the latest selloff and a significant year-to-date climb for Coinbase. However, Coinbase has lost more than 76% since the beginning of 2022 and more than 82% since its IPO in 2021. Coinbase has gained more than 77% in 2023.

It is worth noting that the SEC’s announcement of a settlement with Coinbase’s competitor cryptocurrency exchange, Kraken, on Thursday afternoon put an end to such speculations. Through its crypto-staking platform, Kraken was allegedly selling securities without registering the offering to the public.

SEC Moves Closer to Regulating Cryptocurrencies

The SEC has targeted the cryptocurrency sector in many measures, with today’s result being the most recent. The SEC claimed only a few weeks prior that cryptocurrency lenders Genesis and Gemini issued and marketed unregistered securities.

The decision was also taken just one day after Coinbase CEO Brian Armstrong stated that he had received rumors that the SEC could prohibit retail customers from using the staking feature.

Armstrong made some remarks on Wednesday night, but the SEC opted not to respond and instead took immediate action. This calls into doubt the exclusive staking services provided by Coinbase as well as those offered by other American exchanges.

Gary Gensler, the chairman of the Securities and Exchange Commission, has previously said that staking could need to pass the Howey Test, even if it is distributed through a licensed intermediary like Coinbase or Kraken. The Howey Test has been used for many years to evaluate whether a token is regarded as security under local laws.

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About B. Ali PRO INVESTOR

Live webinar speaker and derivatives (Forex, Crypto, and Indices) analyst with a broad range of skills for evaluating financial data, investment trends, technical analysis, fundamental analysis, and the best ways to strategies investment selection.  Expertise: Trading Psychology; Speculative Positioning & Market Sentiment; Technical & Fundamental Analysis.