The recent rumors said that the US authorities are planning to crack down on staking in the country, as they are beginning to view it as a security, and the first hints that the rumors are true are already emerging. The biggest confirmation so far is the lawsuit that the US regulator filed against the crypto exchange Kraken this Thursday.
1/ We’re hearing rumors that the SEC would like to get rid of crypto staking in the U.S. for retail customers. I hope that’s not the case as I believe it would be a terrible path for the U.S. if that was allowed to happen.
— Brian Armstrong (@brian_armstrong) February 8, 2023
Kraken agrees to the SEC’s terms
Kraken immediately reached out to make a settlement, agreeing to end its crypto staking-as-a-service platform for US users. On top of that, the exchange also agreed to pay a $30 million fine for offering unregistered securities, according to the SEC statement.
1/ Kraken just settled with the SEC over charges of offering unregistered securities to US users through their crypto staking service. They agreed to stop offering staking to US users and pay $30 million, but the big question is what does this mean for crypto as a whole? 👇🏼 pic.twitter.com/owJAmo93ks
— Satoshi Stacker (@StackerSatoshi) February 10, 2023
The statement said that Payward Trading Ltd. and Payward Ventures, Inc. — the two companies that make up Kraken — have agreed to end staking services that were available to US users since at least 2019.
Kraken published its own blog post on the matter, stating that it intends to automatically unstake any assets that remain staked by the US clients. The only exception is staked Ether, which will remain staked until after the Ethereum Network’s Shanghai upgrade gets implemented. In addition, starting today, US customers will not be
As for non-US customers, they will not be affected, and they will be able to stake new assets at any point.
The role of staking is in question
Kraken’s staking service offered a 20% yield, while the SEC press release suggests that the percentage might be as high as 21%.
The SEC’s further characterization of the staking service offered by the exchange highlighted certain risks that investors take on when staking their tokens. The SEC believes that the service and the entire process leave users with very little protection.
Crypto staking has been a popular process in the crypto industry that allows PoS blockchain networks to maintain their security. The network’s decentralized validators can use cryptocurrencies as a form of collateral as confirmation that they will stay honest.
In exchange for their services in transaction processing, users get rewards in the form of new tokens. A lot of stakers also use crypto loan services to lend their coins and tokens to service providers who run nodes, and share the rewards.
The question now is what will happen to other staking services in the US, such as Coinbase, which also allows users to stake their cryptos. The SEC Chair Gary Gensler commented on the matter, stating that “Whether it’s through staking-as-a-service, lending, or other means, crypto intermediaries, when offering investment contracts in exchange for investors’ tokens, need to provide the proper disclosures and safeguards required by our securities laws.”
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