Feb 11, 2023

Crypto Community Outraged Over SEC’s Kraken Charges

The crypto community has recently been in an uproar following the charges laid against crypto exchange Kraken in relation to its staking-as-a-service program in the United States. On Feb. 9, the United States Securities Exchange Commission (SEC) announced that it had settled charges with Kraken over “failing to register the offer and sale of their crypto asset staking-as-a-service program” which the SEC claims is qualified 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. However, staking services will still be offered offshore.

The news has been met with a variety of reactions 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. He also questioned why the same standards weren’t applied to Sam Bankman-Fried and FTX.

Kristin Smith, CEO of the Blockchain Association, argued in a statement that this situation is a textbook example of 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 — reiterated the importance of staking in the crypto ecosystem, noting that staking services will play an important role in “building the next generation of the internet” and 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. Other members of the community questioned how Kraken could possibly have registered with the securities regulator, as there was “no clear path” to approve crypto staking.

Not all were against the SEC’s decision, however. Prominent Bitcoin bull Michael Saylor — 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 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.

The implications of this news could have a major impact on the web3 space, and in particular, the NFT and crypto marketing industry. NFT marketing agencies, such as Twitter NFT marketing, NFT marketing agencies, and web3 agencies, will be affected by the SEC’s decision, as they will have to adjust their strategies to comply with the SEC’s regulations. Selling NFTs could become more difficult, as the SEC’s regulations could limit the number of potential buyers. As a result, NFT promotion and marketing strategies may need to be adjusted to take into account the SEC’s new regulations.

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