Kraken Settles with SEC for $30 Million Over Unregistered Staking Program
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Kraken, the San Francisco-based cryptocurrency exchange, has agreed to pay $30 million and cease offering or selling securities through crypto asset staking services or staking programs to settle a complaint by the U.S. Securities and Exchange Commission (SEC). The SEC claims that Kraken’s staking program, which started in December 2019, generated at least $147 million in net revenue for the exchange through mid-2022, with around 135,000 U.S. customers staking over $2.7 billion worth of tokens.
JUST IN: #Crypto exchange Kraken shuts down staking following SEC charges.
— Watcher.Guru (@WatcherGuru) February 9, 2023
The SEC’s action against Kraken has left rival Coinbase bracing for impact. SEC Chairman Gary Gensler stated that crypto intermediaries, such as Kraken, need to provide the proper disclosures and safeguards required by securities laws when offering investment contracts in exchange for investors’ tokens. SEC Division of Enforcement Director Gurbir Grewal said that the SEC had retail investors in mind when it shut down “this unregistered crypto staking program, through which Kraken not only offered investors outsized returns untethered to any economic realities but also retained the right to pay them no returns at all.”
Kraken’s 2021 annual shareholder update revealed that staking was its fastest-growing product in 2021, accounting for more than one-third of its gross revenue growth. However, the company’s financial reports are private, and it isn’t required to issue quarterly financial reports.
Ruling on Kraken a Warning Sign for Crypto Exchanges
This latest settlement by the SEC emphasizes the importance of following regulations in the rapidly growing cryptocurrency market. Companies must ensure they are in compliance with the SEC’s regulations and that they are providing the proper disclosures and safeguards to protect the investments of their customers. The settlement with Kraken should serve as a warning to other cryptocurrency exchanges that the SEC is closely monitoring their operations and will take action against any violation of securities laws.
In conclusion, Kraken’s agreement to pay $30 million and give up its U.S. token-staking business is a significant development in the cryptocurrency market. The settlement serves as a reminder of the importance of compliance with SEC regulations and the protection of retail investors in the cryptocurrency market.
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