Feb 11, 2023
Crypto Community Outraged Over SEC Charges Against Kraken
The crypto community has been in an uproar over the recent charges brought against crypto exchange Kraken by the United States Securities Exchange Commission (SEC) related to its staking-as-a-service program.
On February 9th, the SEC announced that Kraken had failed to properly register the offer and sale of their crypto asset staking-as-a-service program, which is considered a security under the SEC’s purview. Kraken has agreed to settle the charges by paying $30 million in fines and to immediately cease offering staking services to U.S. retail investors.
The news has been met with criticism from investors, politicians, and industry executives. Cinneamhain Ventures partner and Ethereum bull, Adam Cochran, called out SEC chief Gary Gensler, describing him as “an agent of an anti-crypto agenda” rather than a regulator, and questioning why the same standards weren’t applied to Sam Bankman-Fried and FTX.
Kristin Smith, CEO of the Blockchain Association, argued that the situation is a textbook example as to why Congress — not the SEC — should be working with industry players to create appropriate legislation. U.S. Congressman Tom Emmer echoed this sentiment, stressing the importance of staking in the crypto ecosystem and how the “purgatory strategy” will hurt “everyday Americans the most” as they are forced to seek 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, such as mandating proof-of-reserves, requiring staking transparency, and supporting decentralized staking.
Not all were against the SEC’s decision, however. Prominent 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. Jake Chervinsky, attorney and chief policy officer of the Blockchain Association, noted that Kraken’s decision to settle was likely an economic decision rather than a legal one.
The SEC’s charge towards enforcing action against staking service providers 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.
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