Feb 11, 2023

SEC Commissioner Blasts Agency Over Kraken Shutdown

The U.S. Securities and Exchange Commission (SEC) has been rebuked by its own Commissioner, Hester Peirce, for its recent shutdown of crypto exchange Kraken’s crypto staking program in the United States.

In a Feb. 9 statement titled “Kraken Down”, Commissioner Peirce argued that the SEC’s “regulation by enforcement” approach is not an effective or fair way to regulate the emerging web3 space.

“Using enforcement actions to tell people what the law is in an emerging industry is not an efficient or fair way of regulating. Moreover, staking services are not uniform, so one-off enforcement actions and cookie-cutter analysis does not cut it,” she wrote.

The Commissioner further suggested that the SEC should have initiated a “public process to develop a workable registration process that provides valuable information to investors”.

Coinbase CEO and co-founder Brian Armstrong agreed with Peirce’s comments in a Feb. 9 tweet, noting that requiring businesses to register its staking services is a “disingenuous offer” as there is no clear path to registration.

On Feb. 9, the SEC announced that it had reached a $30 million settlement with Kraken, saying it failed “to register the offer and sale of their crypto asset staking-as-a-service program.”

Kraken said in a Feb. 9 blog post 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 Peirce, known as the SEC’s “Crypto Mom”, has been a strong advocate for the crypto industry during her time at the regulator. Peirce 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 crypto and NFT space has seen an influx of interest over the past year, with many investors turning to crypto staking and NFTs as a way to generate returns. This has led to a surge in demand for crypto and NFT marketing services, as well as NFT promotion and Twitter NFT marketing.

To meet this demand, web3 agencies and NFT marketing agencies have sprung up to help creators and businesses promote and sell their NFTs. These agencies provide a range of services, from developing promotional campaigns to helping clients navigate the complexities of the crypto and NFT space.

The SEC’s crackdown on Kraken’s staking program is a reminder that businesses must remain compliant with the regulator’s regulations and that the SEC will take action against companies that fail to do so. However, businesses should not be discouraged from exploring the opportunities presented by the web3 space, as long as they are aware of the risks and take the necessary steps to ensure they remain compliant.

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