Feb 11, 2023
Crypto Community Outraged Over SEC Charges Against Kraken
The recent charges brought against crypto exchange Kraken in relation to its staking-as-a-service program in the United States have caused a stir in the crypto world. On February 9th, the United States Securities Exchange Commission (SEC) announced that Kraken had violated securities regulations and agreed to pay a $30 million fine and cease offering staking services to U.S. retail investors.
The news has caused a great deal of outrage amongst both crypto investors and industry executives. Adam Cochran, a partner at Cinneamhain Ventures and Ethereum bull, took to Twitter to call out SEC chief Gary Gensler and question why the same standards weren’t applied to Sam Bankman-Fried and FTX. Kristin Smith, CEO of the Blockchain Association, argued that it is a textbook example of why Congress — not the SEC — should be working with industry players to create appropriate legislation.
U.S. Congressman Tom Emmer also weighed in, stressing the importance of staking in the crypto ecosystem and pointing out that the “purgatory strategy” will hurt “everyday Americans the most” as they may soon be forced to fetch such services offshore. Ryan Sean Adams, the founder of the Ethereum show Bankless, suggested that the SEC could have taken other measures rather than charging Kraken out of the blue.
On the other hand, Bitcoin bull Michael Saylor agreed with Gensler’s analysis that retail investors “lose control” of their tokens when they’re delegated to external staking service providers. Attorney and chief policy officer of the Blockchain Association, Jake Chervinsky, noted that such “settlements are not law” and that Kraken’s decision to settle was likely an economic decision rather than a legal one.
The SEC’s action has brought to light the need for more clarity and guidance when it comes to staking services. The lack of a clear path to approval has caused concern amongst the crypto community, as well as speculation that it could impact Ethereum’s consensus layer, given Kraken’s status as the fourth-largest validator on Ethereum.
The debate has prompted Coinbase CEO Brian Armstrong to say that “regulation by enforcement” would be a “terrible path” for U.S. innovators, as they’ll be forced to push more of their services offshore.
The crypto community is now turning to Congress to come up with a solution that can provide clarity and guidance on staking services and NFTs, as well as create a regulatory framework that allows U.S. innovators to remain competitive in the space.
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