Feb 10, 2023
SEC Commissioner Blasts Agency for Kraken Shutdown
The United States Securities and Exchange Commission (SEC) has recently come under fire from its own Commissioner, Hester Pierce. Commissioner Pierce publicly rebuked the SEC for shutting down crypto exchange Kraken’s crypto staking program in the United States. In a statement released on February 9th, titled “Kraken Down,” she argued that using enforcement actions to regulate an emerging industry is not an efficient or fair way of doing so.
In the statement, Commissioner Pierce highlighted that the SEC’s decision to shut down the staking program was not beneficial to investors, and slammed the regulator for shutting down a “program that has served people well.” She further argued that one-off enforcement actions and cookie-cutter analysis does not suffice, and that the SEC should have initiated a public process to develop a workable registration process that provides valuable information to investors.
Brian Armstrong, CEO and co-founder of Coinbase, agreed with the Commissioner’s comments in a tweet, suggesting that requiring businesses to register its staking services is a “disingenuous offer” as there is no clear path to registration.
The SEC announced that it had reached a $30 million settlement with Kraken on February 9th, citing that the exchange failed “to register the offer and sale of their crypto asset staking-as-a-service program.” Kraken stated that it would still offer staking services to non-U.S. customers through a subsidiary, but according to the SEC announcement, the firm is permanently banned from providing staking services to U.S. residents, even if they sought to register it with the regulator.
Commissioner Pierce, also known as the SEC’s “Crypto Mom,” has been a strong advocate for the crypto industry during her time at the regulator. She has proposed a “safe harbor” for token projects which are looking to build decentralized networks, in which the network developers would receive a three-year grace period where they were exempt from SEC legal action.
The SEC’s decision to shut down Kraken’s staking program has shed light on the need for more clarity and guidance for businesses operating within the web3 space. The SEC’s enforcement-focused approach to regulating the industry is not only inefficient, but also stifles innovation and hinders the growth of the industry.
In order to create an environment that is conducive to innovation, the SEC must provide clear guidance for businesses that are looking to engage in crypto-related activities. This could include providing more clarity on the registration process for businesses looking to offer NFTs, crypto staking services, and other web3 services.
The SEC should also consider allowing businesses to engage in promotion and marketing activities for their NFTs and other web3 services. This could include allowing businesses to advertise and promote their services on social media platforms such as Twitter, as well as allowing businesses to hire NFT marketing agencies to help them sell their NFTs.
By providing more clarity and guidance for businesses operating within the web3 space, the SEC can create an environment that is conducive to innovation and growth. This would pave the way for more businesses to enter the space, and would help to further drive the adoption of crypto and web3 services.
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