Feb 11, 2023
SEC Commissioner Blasts Agency Over Kraken Shutdown
The United States Securities and Exchange Commission (SEC) has been called out by one of its own commissioners, Hester Peirce, for their decision to shut down crypto exchange Kraken’s crypto staking program in the United States. In a statement titled “Kraken Down” on Feb. 9, Peirce argued that regulation by enforcement is not an effective or fair way to govern an emerging industry.
The commissioner went on to criticize the SEC for shutting down a program that had been serving people well. She suggested that the regulator should have initiated a public process to create a registration process that would provide investors with valuable information.
Coinbase CEO and co-founder Brian Armstrong, who had previously expressed his concerns over the SEC’s rumored attempt to get rid of crypto staking services for retail customers, agreed with Peirce’s comments in a tweet. He noted that there was no clear path to registration, making the offer disingenuous.
On Feb. 9, the SEC announced a $30 million settlement with Kraken, arguing that they failed to register the offer and sale of their crypto asset staking-as-a-service program. Kraken responded by stating that they would still offer staking services to non-U.S. customers, but U.S. customers would be permanently excluded from the service, even if the company were to register with the SEC.
The SEC’s “Crypto Mom”, Peirce, has been a strong advocate for the crypto industry during her time at the regulator. In April 2021, she proposed a “safe harbor” for token projects that are looking to build decentralized networks, which would exempt them from SEC legal action for three years.
The Kraken case highlights the need for clear regulations and guidelines for crypto businesses in the U.S. to ensure that the industry can thrive and investors can be protected. The SEC should consider taking a more proactive approach to developing a regulatory framework for the industry, as regulation by enforcement is not an effective way to govern an emerging industry.
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