Feb 11, 2023
Crypto Community Outraged Over SEC’s Kraken Charges
The crypto community has been abuzz with outrage in response to the recent charges filed against the crypto exchange Kraken over its staking-as-a-service program in the United States.
The United States Securities Exchange Commission (SEC) announced on February 9th that it had settled charges with Kraken for failing to register the offer and sale of their crypto asset staking-as-a-service program, which the SEC claims qualifies as securities under its purview.
Kraken agreed to settle the charges by paying $30 million in fines and to immediately cease offering staking services to U.S. retail investors, though they will continue to be offered offshore.
The move has been met with criticism from investors, politicians, industry executives, and the general crypto community. Adam Cochran, partner at Cinneamhain Ventures and Ethereum bull, called out SEC chief Gary Gensler, describing him as “an agent of an anti-crypto agenda” rather than a regulator.
Kristin Smith, CEO of the Blockchain Association, shared a statement on Twitter on February 9th, arguing that the situation is a textbook example why Congress — not the SEC — should be working with industry players to forge appropriate legislation.
U.S. Congressman Tom Emmer, who has long been a critic of Gary Gensler, also commented on the issue, reiterating the importance of staking in the crypto ecosystem and arguing 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 to his Twitter followers that the SEC could have taken other measures rather than charging Kraken out of the blue.
Meanwhile, Michael Saylor, a prominent Bitcoin bull who has long considered ETH and other proof-of-stake cryptocurrencies to be securities, 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 debate comes as the SEC’s charge towards enforcing action against staking service providers 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 SEC’s decision to charge Kraken has raised questions about the future of NFT marketing and promotion, as well as the role of web3 agencies and NFT marketing agencies. Crypto users are now asking whether or not the SEC will take action against these organizations for selling NFTs and promoting them on social media platforms such as Twitter.
The SEC’s decision will have a lasting impact on the crypto space, and it is clear that the industry must come together to develop a clear regulatory framework that will protect investors and promote innovation. Until then, it is important that crypto users remain vigilant and aware of the potential risks associated with staking and NFTs.
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